There is lots of ink spilled on what to expect a private practice therapist’s salary to be. Frankly, some of the numbers are ridiculous. One post inaccurately reports, “The average salary for a private practice clinical therapist is $150,000 per year.” Wrong! Of course, a few private practice therapists make that, but that is nowhere near the average. Putting such inaccurate numbers out there sets people up for disappointment.
Here we will be far more realistic about what a real-world private practice therapist’s salary is. Let’s begin.
Table of contents
- Understanding how private practice works
- Methods for determining a private practice therapist’s salary
- So how much does a private practice psychotherapist make?
Understanding how private practice works
Before we can determine a typical private practice therapist’s salary, we need to sort out some of the unique features of a private practice arrangement.
Where does the money for a private practice therapist’s salary come from?
The private practice business model is this. The private practice therapist, or the agency they work for, charges a fee for the clinical service they provide. The length of time one spends with the client(s) is usually the basis for the price. Additionally, therapists utilize different CPTs to designate the length of a treatment session.
Typically, in the USA, the insurance company and the client each pay part of the fee. And in all cases where an insurance company is involved, they set the maximum amount they and the client will pay.
Elsewhere I have written about how mental health providers do not really control their payment structure. Insurance companies do. See, Wealth in mental health–Why isn’t there more? And for more on the pros and cons of joining insurance panels, see, Why join insurance panels.
Typically, private practice therapists do not get a “salary”
In the real world, most private practice therapists do not get a salary. Instead, they are paid a “percentage of collections.” So how does this work?
Money is collected for a clinician’s services. This income is the basis for the private practice therapist’s pay. Typically, a percentage of the funds is paid directly to the private practice therapist in the form of wages. The organization retains the rest to cover its expenses.
This approach is sometimes called productivity-based pay and is perfectly legal. In 2020, I surveyed 40 clinicians who shared data about the splits. The 40/60, 50/50, 60/40, and even 70/30 splits were not uncommon. For the complete summary, see Survey results: Therapist wages and benefits from 40 practices.
Interestingly, productivity-based pay systems are popular with physicians as well. According to the latest physician salary info, productivity is a basis for pay for the majority. See, Pay is productivity-based for nearly 55% of physicians.
And there will be a ramping up period
Productivity-based pay systems have their downsides. For example, because private practice pay is dependent on collections, any delay in collecting for a service means a delay in wages.
For example, especially when working with insurance companies, there ordinarily will be a lag between the service date and receiving full payment. The delay is due to the administrative time it takes to bill for the service, evaluate the claim, and receive compensation. These processes take time and can add from 15 to 45 days between the service and payment dates.
These delays are most noticeable when ramping up at the beginning of employment in private practice. The newly beginning clinician is building up the number of client hours and dealing with the payment delays. However, everyone in private practice found a way to get through these financially-trying beginning phases. In the end, most find the higher levels of compensation warrant tolerating the delays.
Contracts define the arrangement
In most employment settings, the organization will have developed an employment contract that will spell out the parameters of compensation and other details. Obviously, read the agreement thoroughly and ask lots of questions. For more, see: How to construct the best possible psychotherapist employment contract.
Methods for determining a private practice therapist’s salary
Now we are ready to look at several ways to estimate an actual private practice therapist’s salary. For example, we could:
- Dig out some national occupational survey data on psychotherapists’ salaries
- Estimate the factors which determine how much a therapist makes
- Interview people we know who are practicing in the way we would want
I am going to summarize data from all three sources.
1. National Survey Data
Our first point of comparison is to look at the May 2020 National Occupational Employment and Wage Estimates collected by the United States Department of Labor, Bureau of Labor Statistics. Here we see survey data collected from people in the field. Buried in the data are the salaries for mental health clinicians. In round numbers, psychotherapists’ yearly salaries are these:
- Social Workers
- median annual income = $52,000
- those in the 90% percentile make < $85,000
- median annual income = $50,000
- those in the 90% percentile make < $85,000
- Marriage and Family Therapists
- median annual income = $50,000
- those in the 90% percentile make < $92,000
- median annual income = $82,000
- those in the 90% percentile make < $135,000
So what does this mean?
In short, when we look at actual master-level psychotherapists’ annual salaries, the most frequently reported salary is around $50,000 to $52,000 per year. Very few earn above $100,000 per year. In comparison, psychologists see higher wages with a much higher upside potential than the other mental health disciplines.
As a side note, I compared the 2018 data with the 2020 data to look for trends. In general, the median income across all four professions went down a couple of thousand dollars. The drop signifies that there are more lower-paying positions in 2020 than in 2018. Interestingly, those in the 90th percentile saw their salaries increase. So additionally, it seems that typically those at the top are doing even better than they were.
So can we figure out how to make those higher wages? That leads us to our second method for determining a private practice therapist’s salary.
2. A private practice therapist salary calculator
I have developed a “calculator” that takes five key factors that determine private practice therapists’ salaries. These factors are:
- Number of sessions you provide
- Your collections rate, i.e., the average amount you collect for each session
- How many weeks you are willing to work in a year
- Your expenses
- The benefit costs and tax obligations you have
In the calculator, you can adjust each factor and see how it shapes the bottom line wages. See, How to calculate a psychotherapist’s private practice pay.
Based on the assumptions one makes in the app, a therapist can potentially have a pre-tax salary between $41,400 to $175,000. That range is not very helpful. But if you select variables based on what you know about your particular situation, we will get a pretty good estimate tailored to you. Furthermore, the calculator may help you identify ways to increase how much you make as a therapist.
I have also written:
- Wealth in mental health–Where are the good-paying jobs?
- How to increase therapist pay in private practice
3. Interview those in the field
By far, the most challenging way to collect private practice salary information is to ask those who work in positions you aspire to. But of course, this method has many drawbacks.
First, all people are reluctant to share salary information. But they might share, in general terms, what a person in a psychotherapy position like theirs might expect to make. But clearly, this is a delicate conversation.
Second, money has an emotional meaning for people. This topic is explored in the books “Mind over Money: Overcoming the Money Disorders That Threaten Our Financial Health” and then “Financial Therapy: Theory, Research, and Practice.” I highly recommend both if you are interested in how attitudes about money are formed and deformed.
However, I do think it is appropriate, in a job interview, to ask something like, “So if I am willing to work about x clinical hours per week, what might I expect to be my annual salary?” The owners typically know from how much others in their practice make.
So how much does a private practice psychotherapist make?
Of course, a psychotherapist’s salary all depends on many factors. But here, we have at least given you reasonable, real-world data and an understanding of the factors contributing to an actual private practice therapist salary.