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Locum tenens physicians are classified as independent contractors in most engagements. This means you receive 1099-NEC income, pay self-employment tax (15.3% on net earnings up to the Social Security wage base), and can deduct business expenses including travel, housing, and professional fees. Most locum physicians must pay quarterly estimated taxes to the IRS (due April 15, June 15, September 15, and January 15). The most significant tax strategy for high-earning locum physicians is forming an S corporation, which can reduce self-employment tax by paying a reasonable salary to the physician-owner and taking remaining income as distributions not subject to self-employment tax. Here is exactly how to structure your taxes.
Locum Tenens Tax Guide 2026: Independent Contractor Essentials for Physicians
Taxes are the most common reason experienced physicians are hesitant about locum work — not because locum taxes are complicated, but because most physicians have never navigated self-employment taxation before. For 15 years, their employer handled withholding. Transitioning to independent contractor status means assuming that responsibility yourself. For a complete overview of the locum tenens model — including how credentialing, income, and platform fees work — see the complete physician credentialing guide.
This guide covers the specific tax mechanics that apply to locum physicians in 2026: your employment status and what it means, quarterly estimated taxes, the most valuable deductions available, and the business structure strategy that matters most at higher income levels.
This is not tax advice. For specific guidance on your situation, work with a CPA who has experience with physician contractors — this is a specialized enough area that it is worth the cost.
Your Tax Status as a Locum Physician
When you work as a locum physician through a staffing agency or directly with a facility, you almost always work as an independent contractor (IC) — not an employee. Your compensation is reported on a 1099-NEC (previously 1099-MISC), not a W-2.
The practical difference:
| W-2 Employee | 1099 Independent Contractor |
|---|---|
| Employer withholds federal/state taxes | You are responsible for all tax payments |
| Employer pays 7.65% FICA (Social Security + Medicare) | You pay both halves — 15.3% self-employment tax |
| Tax withheld from each paycheck | You pay quarterly estimated taxes |
| Limited deductions available | Business expense deductions significantly reduce taxable income |
The self-employment tax reality: A physician earning $350,000 in 1099 locum income owes approximately $27,000 in self-employment tax on top of federal and state income tax. This is the number that surprises first-year locum physicians who do not plan for it. Quarterly estimated taxes are how you avoid an IRS underpayment penalty. Understanding credentialing time to first shift also matters for tax planning — the faster you start working after accepting a position, the better your cash flow for covering estimated tax payments.
Quarterly Estimated Taxes
As a 1099 contractor, you are required to pay estimated taxes quarterly if you expect to owe more than $1,000 in taxes for the year (which applies to virtually every locum physician).
2026 Quarterly Payment Deadlines
| Payment | Covers Income Period | Due Date |
|---|---|---|
| Q1 | January 1 – March 31 | April 15, 2026 |
| Q2 | April 1 – May 31 | June 16, 2026 |
| Q3 | June 1 – August 31 | September 15, 2026 |
| Q4 | September 1 – December 31 | January 15, 2027 |
How to calculate your quarterly payment:
Option 1 (Safe Harbor): Pay 100% of your prior year's tax liability (110% if prior year AGI > $150,000) divided into 4 equal payments. This method avoids underpayment penalties regardless of what you actually earn.
Option 2 (Actual income method): Estimate your actual current-year income and pay 90% of that year's projected tax liability. More precise but requires ongoing income tracking.
Most locum physicians use the safe harbor method in their first year of locum work, then shift to the actual income method once they have a year of locum earnings to benchmark.
Where to pay: IRS Direct Pay (irs.gov/payments) or IRS EFTPS. Set aside roughly 35-40% of each 1099 payment for taxes (federal income + self-employment + state) until you have a CPA calculate your precise number.
What You Can Deduct as a Locum Physician
The significant tax advantage of IC status is business expense deductibility. As an employee, your deduction options are limited. As a self-employed independent contractor, a broad range of legitimate business expenses are deductible against your gross 1099 income before tax is calculated.
Tier 1: Near-Universal Deductions (All Locum Physicians)
Malpractice insurance premiums:
If you carry your own tail or occurrence coverage (rather than relying solely on the agency-provided policy), your personal premium payments are fully deductible. For most locum physicians carrying $1M/$3M occurrence coverage independently, annual premiums range $2,000-$8,000 depending on specialty and carrier.
Licensing and credentialing fees:
- State medical license fees (all states where you hold an active license)
- DEA registration fees ($888/3-year cycle as of 2026)
- IMLC compact license fees (state-by-state; typically $30-$250 per state)
- CVO verification fees (if you pay out of pocket)
- SANNEXUS credentialing passport subscription
Professional society dues:
ACEP, ACS, SHM, RSNA, AMA, and equivalent specialty organizations. Fully deductible as professional dues.
CME and board maintenance:
CME course registration fees, board exam fees, MOC fees, conference registration. Medical conferences are deductible when attendance has a clear relationship to your practice — generally straightforward for specialty-specific conferences.
Medical licenses and DEA for multiple states:
Locum physicians often hold licenses in 5-15+ states. Each license fee is deductible.
Tier 2: Assignment-Related Travel Expenses
Travel expenses for locum assignments are deductible when your tax home is established elsewhere. This is a substantial deduction category for locum physicians working away from their primary residence.
Deductible travel components:
- Airfare (direct cost, not first class unless first class is necessary)
- Ground transportation (rental car, rideshare from airport to facility)
- Hotel or furnished apartment during assignment
- Meals while traveling for business (50% deductible — the meal deduction limitation)
- Parking and tolls related to assignment travel
The tax home question: To deduct travel expenses, you must have an established tax home. Your tax home is generally where your principal place of business is — if you are a true itinerant locum physician with no permanent location, all of your locations may be considered "home," eliminating the away-from-home deduction. Physicians with a fixed primary state of residence and a home they maintain there are in the strongest position to deduct assignment travel.
Critical: If you are on a locum assignment at the same location for more than 12 consecutive months, IRS rules convert your "temporary" assignment to a permanent one — and you lose the travel deductibility for that location. Most locum contracts are structured to avoid this threshold.
Tier 3: Office and Equipment
Home office deduction:
If you maintain a home office used exclusively and regularly for business (managing your contracts, billing, credentialing, continuing education) you can deduct either: (a) a percentage of home expenses based on square footage, or (b) the simplified method ($5/sq ft, max 300 sq ft = $1,500/year). For most physicians, the simplified method is appropriate given the administrative cost of the regular method.
Technology and equipment:
- Computer and iPad used for professional work (proportional to professional use)
- Medical reference tools and apps (UpToDate, Epocrates subscriptions)
- Encrypted communication tools required by facilities
- Billing software if you handle your own invoicing
Professional publications and subscriptions:
Medical journals, clinical decision support subscriptions, specialty newsletters.
The S Corporation Strategy
This is the most significant tax planning decision available to high-earning locum physicians. It does not apply to everyone — but for physicians earning more than approximately $80,000-$100,000 in annual 1099 locum income, it is worth understanding.
How Self-Employment Tax Works Without an S-Corp
As a sole proprietor or single-member LLC taxed as a disregarded entity, your entire net self-employment income is subject to self-employment tax:
- 12.4% Social Security tax on income up to $168,600 (2026 wage base)
- 2.9% Medicare tax on all net self-employment income (no cap)
- 0.9% Additional Medicare Tax on income over $200,000 (single) or $250,000 (married)
At $350,000 net locum income, your self-employment tax is approximately $27,000+.
How an S Corporation Reduces That Tax
When you form an S corporation (a regular corporation with an S election), you become an employee of your own corporation. You pay yourself a "reasonable salary" — let's say $120,000. The remaining $230,000 flows to you as a shareholder distribution.
The tax difference:
- Self-employment tax applies to the $120,000 salary (FICA): ~$18,360
- The $230,000 distribution is NOT subject to self-employment tax
- Social Security + Medicare only on the reasonable salary component
Net tax savings at this structure: Roughly $8,000-$12,000 annually, depending on total income. S-corps have administrative costs (state filing fees, additional accounting complexity, payroll processing — typically $1,500-$3,000/year). The net benefit is real but must exceed the administrative cost.
When the S-corp strategy makes sense:
- Annual 1099 locum income > $100,000 consistently
- You plan to maintain a locum practice for 3+ years
- You have a CPA who can handle S-corp returns (Schedule K-1, reasonable compensation documentation)
When it does NOT make sense:
- You are testing locum work for one year
- Your locum income is supplemental, not primary
- You cannot find a CPA comfortable with physician S-corp structures
Professional Entity Structure Options
| Structure | Best For | Self-Employment Tax | Setup Cost | Complexity |
|---|---|---|---|---|
| Sole proprietor (Schedule C) | Part-time / first year | Full SE tax on all net income | None | Low |
| Single-member LLC | Liability protection + same tax as sole prop | Full SE tax (same as sole prop) | $100-$500 state fees | Low |
| S-Corporation | $100K+ annual 1099 locum income | Only on reasonable salary portion | $1,000-$2,000 + annual fees | Medium-high |
State Tax Considerations for Multi-State Locum Work
Physicians working in multiple states have multi-state tax filing obligations. Generally:
- You owe income tax to each state where you earn locum income
- Most states require a non-resident return if you earn income there above a threshold
- States without income tax (Florida, Texas, Nevada, Tennessee, Washington) are the most locum-friendly from a tax standpoint
Florida advantage: Florida has no state income tax. Physicians living in Florida who work locum assignments in other states will owe income tax to those states, but their Florida-based income is not state-taxed. This is a meaningful long-term consideration for locum physicians choosing a primary residence.
Reciprocity agreements: Some states have reciprocity agreements that eliminate double taxation between paired states. Most do not. Track your income by state — most CPA software handles the apportionment, but you need clean records.
Tax Records to Maintain as a Locum Physician
Keep the following organized throughout the year — quarterly reconciliation prevents scrambling at tax season:
- All 1099-NEC forms received from agencies or direct facilities
- Bank statements showing all business-related deposits and expenses
- Travel expense receipts and records (date, destination, business purpose)
- Malpractice insurance policy documents and premium payment confirmations
- Licensing fee receipts (state boards, DEA, CME providers)
- Home office documentation if using that deduction
- Professional dues and subscription receipts
- Contracts for each locum engagement (for establishing assignment duration and tax home evidence)
The SANNEXUS Approach to Physician Payments
SANNEXUS uses direct IC contracts between physicians and facilities, with platform-facilitated payment processing. Each physician receives a 1099-NEC from SANNEXUS at year-end reflecting all platform-facilitated earnings.
Because SANNEXUS does not mark up physician compensation through an employer model, the rate you see on the platform is the rate you earn — no agency spread, no employer withholding creating false simplicity. The tax obligation is yours, clearly documented, and structured to make quarterly planning straightforward.
[Access your SANNEXUS Earnings Dashboard →] (Track 1099 income, payment history, and quarterly tax estimate tool — available to all registered physicians)
Internal links: Post 1 — Complete Credentialing Guide | Post 5 — EM Locum Florida | Post 4 — SANNEXUS vs. Agencies
Published by SANNEXUS | April 2026
This content is for informational purposes only and does not constitute tax advice. Consult a qualified CPA with experience in physician contractor taxation for advice specific to your situation.