Yes. Locum tenens physicians are independent contractors. You receive a 1099-NEC, not a W-2. You handle your own taxes, you don't get employer benefits, and in exchange you earn significantly more per hour with access to deductions that W-2 physicians can't touch.
That's the one-line answer. Here's everything else you need to know to actually make it work in your favor.
QUICK SUMMARY — LOCUM TENENS 1099 STATUS
Locum tenens physicians are 1099 independent contractors — you receive Form 1099-NEC, not a W-2, and no taxes are withheld from your pay
You pay self-employment tax of 15.3% on top of income tax — this covers both the employee and employer portions of Social Security and Medicare
Quarterly estimated tax payments are required — miss them and you'll owe a penalty on top of what you already owe
Business deductions offset the tax burden significantly — travel, housing, meals, CME, licensing fees, equipment, and more are all deductible
S-Corp election above ~$300K saves $15K–$25K/year in self-employment taxes — this is the single biggest tax optimization for high-earning locum physicians
Solo 401(k) contributions up to $70,000/year — far more than the $23,500 cap on employer 401(k) plans
Get a tax professional who specializes in 1099 physician income — generic CPAs miss locum-specific deductions that add up to tens of thousands per year
What "Independent Contractor" Actually Means
The IRS classifies you as an independent contractor when the entity paying you controls the result of your work but not how you do it. As a locum tenens physician, your agency places you at a facility, but:
- You use your own clinical judgment
- You set your own availability and choose which assignments to accept
- You can work for multiple agencies simultaneously
- The agency doesn't dictate your clinical methods or patient management approach
- You're engaged for a defined period, not indefinitely
This is different from permanent employment, where the hospital controls your schedule, requires attendance at meetings, assigns you to committees, and dictates productivity expectations.
The practical result: you get a 1099-NEC at tax time instead of a W-2. No taxes are withheld from your paychecks. You're responsible for the full tax picture.
1099 vs. W-2: The Financial Breakdown
Here's what changes financially when you move from a permanent W-2 position to locum tenens 1099 status:
What You Lose
| W-2 Benefit | Typical Value |
|---|---|
| Employer-paid health insurance | $8K–$20K/year |
| Employer 401(k)/403(b) match | $5K–$15K/year |
| Employer portion of FICA (7.65%) | Varies by income |
| Paid time off | 3–6 weeks (built into salary) |
| Disability insurance | $2K–$5K/year |
| CME allowance | $2K–$5K/year |
What You Gain
| 1099 Benefit | Typical Value |
|---|---|
| Higher hourly rate (30–50% above permanent) | $50K–$300K+ more/year |
| Agency-paid malpractice ($1M/$3M) | $15K–$40K/year |
| Agency-paid travel and housing | $25K–$50K/year |
| Business expense deductions | $15K–$40K in tax savings |
| Solo 401(k) contributions up to $70K | $18K–$26K in tax savings |
| S-Corp SE tax savings (above $300K) | $15K–$25K/year |
| Schedule control | Not quantifiable, but real |
The math: For most physicians earning above $200K, the 1099 locum tenens model produces higher after-tax income than a comparable W-2 permanent position — even after buying your own health insurance and funding your own retirement.
How Taxes Work as a 1099 Locum Physician
Self-Employment Tax: The 15.3%
As a W-2 employee, you pay 7.65% of your income toward Social Security (6.2%) and Medicare (1.45%). Your employer pays the matching 7.65%.
As a 1099 independent contractor, you pay both halves — 15.3% total. This is called self-employment (SE) tax, and it's on top of your regular income tax.
On $400K in net self-employment income, that's roughly $30,000 in SE tax that you wouldn't pay as a W-2 employee. This is the biggest sticker shock for new locum physicians.
But there are ways to reduce it significantly (see S-Corp section below).
Quarterly Estimated Taxes
No taxes are withheld from your locum paychecks. Instead, you pay estimated taxes four times per year:
| Quarter | Covers | Due Date |
|---|---|---|
| Q1 | Jan – Mar | April 15 |
| Q2 | Apr – May | June 15 |
| Q3 | Jun – Aug | September 15 |
| Q4 | Sep – Dec | January 15 |
*Scroll horizontally to view all columns on mobile devices
Each payment includes your estimated income tax plus self-employment tax for that period.
If you don't pay quarterly: The IRS charges an underpayment penalty — currently around 8% annualized. It's not catastrophic, but it's money you're handing away for no reason.
How to estimate: Take your expected annual income, subtract deductions, calculate the tax, divide by four. Your tax professional should set this up for you at the start of the year. Most locum physicians overpay slightly each quarter and get a refund at filing — better to overpay than owe a penalty.
Deductions That Offset the Tax Burden
This is where 1099 status starts working in your favor. As an independent contractor, you can deduct legitimate business expenses that W-2 physicians cannot. These deductions reduce your taxable income dollar-for-dollar.
What You Can Deduct
| Expense | Notes |
|---|---|
| Travel to/from assignments | Flights, mileage (67 cents/mile in 2026), tolls, parking |
| Meals while traveling | 50% deductible when away from your tax home |
| Home office | If you have a dedicated workspace — calculate by square footage |
| Licensing fees | Every state license, DEA registration, board certification |
| CME and education | Conferences, courses, subscriptions, journals |
| Professional dues | Medical society memberships, specialty organizations |
| Equipment | Laptop, stethoscope, medical instruments, scrubs |
| Health insurance premiums | 100% deductible as a self-employed individual |
| Cell phone and internet | Business-use percentage |
| Professional liability (if self-purchased) | Fully deductible |
| Accountant and tax prep fees | Fully deductible |
Important: Expenses that your agency reimburses (housing, flights, rental cars) are NOT deductible — you can't double-dip. Only out-of-pocket business expenses qualify.
What These Deductions Are Worth
A locum physician with $30,000 in deductible business expenses saves roughly $10,000–$13,000 in federal taxes (at the 32–37% bracket). Combined with the health insurance deduction and retirement contributions, the total tax savings from 1099 status often exceed $40,000–$60,000 per year.
This is why the 1099 model, despite the 15.3% SE tax hit, frequently results in lower effective tax rates than W-2 employment at the same income level.
The S-Corp Strategy: Saving $15K–$25K Per Year
This is the single most impactful tax optimization for high-earning locum physicians, and most don't know about it until they've already overpaid for a year or two.
How It Works
Instead of receiving all your income as 1099 self-employment income (which is all subject to the 15.3% SE tax), you:
- Form an S-Corporation (or elect S-Corp status for your existing LLC)
- Your locum income flows through the S-Corp
- You pay yourself a "reasonable salary" as a W-2 employee of your own S-Corp
- The remaining profit passes through as a distribution — which is NOT subject to SE tax
The Math
| Scenario | Without S-Corp | With S-Corp |
|---|---|---|
| Net locum income | $450,000 | $450,000 |
| Reasonable salary | N/A | $250,000 |
| SE tax base | $450,000 | $250,000 (salary only) |
| SE tax owed | ~$34,500 | ~$19,125 |
| Annual savings | — | ~$15,375 |
*Scroll horizontally to view all columns on mobile devices
At higher income levels, the savings increase. A physician netting $600K+ can save $20K–$25K per year.
When to Make the Election
The general threshold is around $300K in net self-employment income. Below that, the administrative costs of maintaining an S-Corp (payroll processing, additional tax filings, state fees) may not justify the savings.
Your tax professional should model both scenarios with your actual numbers. This isn't something to DIY — the "reasonable salary" determination needs to be defensible if the IRS questions it.
Solo 401(k): The Retirement Advantage
As a 1099 independent contractor, you're not limited to employer 401(k) plans with their $23,500 contribution cap. You can open a Solo 401(k) and contribute up to $70,000 per year (2026 limit, or $77,500 if you're 50+).
How the Contributions Break Down
| Component | 2026 Limit |
|---|---|
| Employee contribution | $23,500 |
| Employer contribution (up to 25% of compensation) | Up to $46,500 |
| Total | $70,000 |
| Catch-up (age 50+) | +$7,500 |
If you're using the S-Corp structure, the employer contribution is based on your W-2 salary from the S-Corp. At a $250K salary, you can contribute the full $70,000.
Tax Impact
$70,000 in pre-tax 401(k) contributions at the 37% marginal rate saves you $25,900 in federal taxes in a single year. Compare that to a W-2 physician limited to $23,500 in employer plan contributions (saving $8,695).
That's a $17,000+ annual tax advantage just from retirement contributions.
Multi-State Tax: The Part Nobody Warns You About
If you work locum assignments in multiple states — and most locum physicians do — you owe state income tax in every state where you earned income. This is true regardless of where you live.
How it works:
- You file a resident return in your home state
- You file a non-resident return in every state where you worked
- Your home state gives you a credit for taxes paid to other states (in most cases) so you're not double-taxed
States with no income tax: Florida, Texas, Tennessee, Nevada, Wyoming, South Dakota, Alaska, Washington, New Hampshire. Working assignments in these states means no state return for that income.
Why this matters for locum physicians: If you live in a no-tax state (say, Florida) and take a 3-month assignment in California, California will tax that income at up to 13.3%. Knowing this before you accept the assignment lets you negotiate a higher rate to compensate — or choose a different state.
A tax professional who specializes in locum tenens income handles multi-state filings routinely. A general CPA might not even know you need to file in every work state.
Your Tax Home: A Critical Concept
The IRS defines your "tax home" as your regular place of business, not necessarily where you live. For locum tenens physicians, this gets complicated.
If you maintain a permanent residence and return to it between assignments, your home is generally your tax home. Travel expenses to and from assignments are deductible.
If you don't maintain a permanent residence and move from assignment to assignment, the IRS may consider you an "itinerant" — meaning your tax home is wherever you're currently working. In that case, travel and housing expenses may NOT be deductible because you're not "away from home."
The fix: Maintain a permanent residence (owned or rented), return to it between assignments, and have genuine ties to that location (driver's license, voter registration, bank accounts). This protects your ability to deduct travel expenses.
This is one of the most commonly missed issues in locum tenens tax planning. Get it right from the start.
Practical Steps to Get Your 1099 Structure Right
Before Your First Assignment
- Open a separate business checking account. Keep all locum income separate from personal accounts. This simplifies bookkeeping and protects you if you're ever audited.
- Download a mileage tracking app. Everlance and MileIQ run in the background and auto-log every drive. At $0.67/mile, a locum physician driving 12,000 business miles saves $8,040 in deductions. You need the app running from Day 1 or you lose those records.
- Start an expense log. Keep receipts digitally — a photo in Expensify or a simple Google Sheets log. The IRS requires documentation for every business deduction.
- Identify a CPA who specializes in physician 1099 income. This is not optional. The difference between a generic CPA and one who specializes in locum physician taxes is often $20,000–$40,000 per year in correctly identified deductions.
- Set up quarterly estimated tax calendar reminders. April 15, June 16, September 15, January 15. Put them in your phone now.
During Your Assignments
- Save every travel receipt. Flights, hotels, rental cars, Uber, tolls, parking — all deductible when traveling away from your tax home.
- Track per diem meals. When traveling for business, 50% of meal costs are deductible. You can use actual receipts or the IRS standard per diem rate ($69–$148/day depending on location).
- Document your tax home clearly. Your "tax home" determines which travel is deductible. If you're full-time locum with no permanent home base, the tax treatment is more complex — a CPA who knows this area is essential.
- Keep a log of every license application, renewal, and CME. These are all deductible, but you need documentation.
At Year-End
- Collect all 1099-NEC forms. Agencies are required to send them by January 31. Cross-check against your own records — discrepancies need to be resolved before filing.
- Review S-Corp timing. If your net income exceeded $300K consistently, discuss S-Corp election with your CPA before the next tax year starts. You generally need to elect by March 15 for the current tax year.
- Max your Solo 401(k). Contributions can be made up to the tax filing deadline (including extensions) for the prior year. Don't leave this money on the table.
Finding the Right Tax Professional
This is not optional advice. Locum tenens tax planning is specialized enough that a generic CPA will miss deductions and strategies worth $15,000–$40,000 per year.
What to look for:
- Experience specifically with 1099 physician income or locum tenens physicians
- Familiarity with multi-state filing for traveling professionals
- Knowledge of S-Corp election and Solo 401(k) optimization
- Proactive quarterly estimated tax planning, not just annual filing
- Comfort with tax home rules for itinerant professionals
Some agencies will connect you with a tax professional for free. Ask. The cost of good tax advice is a fraction of what it saves you.
Use the Tax Calculator
Model your actual numbers — specialty, state, deductions, quarterly payments, Solo 401(k) — with our <a href="/tools/locum-tax-calculator">free locum tax calculator</a>. Built specifically for 1099 physicians, it factors in self-employment tax, state tax by location, common deductions, and retirement contributions to show your realistic effective tax rate and take-home pay.
How 1099 Status Compares to W-2 by the Numbers
Let's put a real example on paper. Same specialty, same gross income, different tax treatment:
| W-2 Hospitalist | Locum 1099 Hospitalist | |
|---|---|---|
| Gross income | $310,000 | $410,000 (30% higher) |
| Employer-paid FICA | $23,715 (not yours) | — |
| Self-employment tax | — | $23,000 |
| Federal income tax (est.) | $82,000 | $89,000 |
| State tax (Texas) | $0 | $0 |
| Health insurance | Employer pays ~$14K | You pay ~$18K (deductible) |
| 401(k) max contribution | $23,500 | $70,000 (saves ~$17K more in taxes) |
| CME allowance | $3,000 (taxable if cash) | $4,000+ (deductible) |
| Malpractice | Employer pays | Agency pays (~$15K value) |
| Travel and housing | Not applicable | Agency covers (~$30K value) |
| Estimated take-home | ~$195,000 | ~$265,000 |
*Scroll horizontally to view all columns on mobile devices
The locum physician earns $70,000 more per year after taxes — despite paying self-employment tax — because the higher rate, the deductions, and the retirement contributions combine to produce a structurally better outcome.
This math gets more favorable the higher the income. At $600K+ gross locum income with S-Corp election and a maxed Solo 401(k), the after-tax advantage over a comparable W-2 position can exceed $100,000 per year.
Frequently Asked Questions
Are locum tenens physicians employees or independent contractors?
Independent contractors. You receive Form 1099-NEC, not a W-2. No taxes are withheld, no employer benefits are provided. In exchange, you earn higher hourly rates, retain full schedule control, and access significant tax deductions not available to W-2 employees.
Why are locum tenens physicians 1099 and not W-2?
Because the agency doesn't control how you practice medicine — only the result (patient care at a specific facility for a specific period). The IRS classifies workers as independent contractors when the payer controls the outcome but not the method. Locum physicians choose their own assignments, set their availability, and can work with multiple agencies simultaneously.
How much more tax do you pay as a 1099 independent contractor?
You pay an additional 15.3% in self-employment tax (covering both employee and employer portions of Social Security and Medicare). However, business deductions, the S-Corp election, and higher retirement contribution limits often result in a lower effective tax rate than W-2 employment at the same income level.
What can locum tenens physicians deduct on taxes?
Travel (flights, mileage at 67 cents/mile), meals while on assignment (50%), home office, licensing fees, DEA registration, CME, professional dues, equipment, health insurance premiums, and accounting fees. Only out-of-pocket expenses qualify — anything reimbursed by your agency is not deductible.
What is the S-Corp election and should I do it?
An S-Corp lets you split your income between a "reasonable salary" (subject to SE tax) and distributions (not subject to SE tax). Above roughly $300K in net income, this saves $15K–$25K/year. Below that threshold, the administrative costs may not justify it. Have your tax professional model both scenarios.
Do locum tenens physicians need to file taxes in every state they work?
Yes. You owe state income tax in every state where you earned income, regardless of your home state. You file non-resident returns in each work state and a resident return in your home state. Your home state typically provides a credit for taxes paid elsewhere. Working in no-tax states (FL, TX, TN, NV, WY, SD, AK, WA) avoids this for that income.
How do quarterly estimated taxes work?
You pay estimated federal (and state) taxes four times per year — April 15, June 15, September 15, and January 15. Each payment covers your income tax plus self-employment tax for that period. Underpayment triggers an IRS penalty (~8% annualized). Your tax professional should calculate your quarterly amounts at the start of the year.
Can I have a 401(k) as a 1099 independent contractor?
Yes — a Solo 401(k), which allows contributions up to $70,000/year (2026 limit), compared to $23,500 in a standard employer plan. This is one of the biggest financial advantages of 1099 status. At the 37% tax bracket, maxing a Solo 401(k) saves $25,900 in federal taxes annually.
The Bottom Line
Locum tenens independent contractor status is a feature, not a drawback. Yes, you pay self-employment tax. Yes, you manage your own benefits. Yes, you file quarterly. But in exchange, you earn significantly more per hour, you access deductions that W-2 physicians can't touch, and you have retirement contribution limits that can shelter $70,000 per year from taxes.
The physicians who thrive financially in locum tenens aren't the ones with the highest hourly rates — they're the ones who treat the 1099 structure as seriously as their clinical practice. S-Corp election, maxed Solo 401(k), organized expense tracking, and a CPA who specializes in physician 1099 income together produce after-tax outcomes that can exceed comparable W-2 positions by $50,000–$120,000+ per year.
At Locums One, we connect every physician with a tax professional who specializes in locum tenens income — at no cost. We also operate at 15–22% margins (vs. the 30–40%+ of most national agencies), which means more of every bill rate goes directly to you.
For cross-specialty pay rates and the full financial picture, see our <a href="/blog/locum-tenens-salary">2026 Locum Tenens Salary Guide</a>. For tax modeling by specialty, state, and working weeks, use our <a href="/tools/locum-tax-calculator">free tax calculator</a>.
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*This article is for informational purposes and does not constitute tax advice. Tax laws change annually and individual circumstances vary. Consult a qualified tax professional who specializes in 1099 physician income for advice specific to your situation. Figures based on 2026 IRS guidelines and current market data.*
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