Therapist cross-border tax: seeing US telehealth clients from a Canadian practice

Where you practise is where the income arises

A session delivered from Brampton is Canadian-source income, even when the client sits in Buffalo or Phoenix. Tax law sources service income by where the work is performed, not where the client lives — so a Canadian therapist running US telehealth sessions from a Canadian office typically has no US filing obligation at all. The treaty adds a second layer of protection: business profits of a Canadian resident are taxable in the US only if earned through a US permanent establishment, which a video link is not.

That answer holds for the pattern most practices actually have: a Canadian clinic, a Canadian therapist, and some proportion of clients across the border. It stops holding when physical facts change — which is the subject of the table below.

When a US payer asks for a W-8BEN

US telehealth platforms, EAP networks, and insurers sometimes refuse to release payment until they hold a tax certification. For a Canadian therapist the right form is the W-8BEN (or W-8BEN-E if you bill through a professional corporation): it certifies you are not a US person and stops the payer from applying the 30% default withholding US payers must use when they have nothing on file. It is a certification, not a tax filing — nothing goes to the IRS or CRA directly.

If a platform withheld anyway before your form was in place, it will issue a Form 1042-S the following March showing the amount taken. Because this income should not have faced US tax at all, the clean fix is usually a US refund claim rather than a Canadian foreign tax credit — and we weigh whether the dollars justify the filing.

What would change the answer

The Canadian return side: exempt services, USD receipts

Since June 2024, psychotherapy and counselling therapy services rendered to individuals are GST/HST-exempt in Canada — and the exemption does not depend on where the client lives, so US telehealth clients change nothing on the sales-tax side. There is no zero-rating decision to make, and no input tax credits to chase, which keeps this one genuinely simple.

Income tax is where the USD flows need discipline: sessions billed in US dollars convert at Bank of Canada rates on your T2125 (or your professional corporation's T2), and a US bank account kept for US clients counts toward the $100,000 CAD T1135 threshold once combined foreign property cost crosses it. Fee-setting, incorporation timing, and the rest of the domestic picture live on our therapist tax services page.

The licensure flag, and clinicians trained in the US

One item we raise in every consult because no one else does: most US states treat telehealth as practised where the client is located, so seeing a client in a given state can require licensure or registration there — psychologists have the PSYPACT compact, other designations vary widely. That is a regulatory and insurance question, not a tax one, and we flag it for your college and liability insurer rather than advise on it. It is also the reason some therapists route US work through platforms that handle credentialing.

For US-trained clinicians who moved home, two loose ends recur: interest on US student loans does not qualify for the Canadian student-loan interest credit (it is limited to loans under Canadian student-loan legislation), and a 401(k) or IRA left behind keeps its own US rules — it can stay put, and in some cases can be moved to an RRSP under special transfer provisions. Both are worth settling in your first Canadian filing year, not your fifth.

Source: IRS — About Form W-8BEN.