The Complete Locum Tenens Tax Guide for 2026: 1099, S-Corp, Deductions, and Retirement

If you're working locum tenens, nobody is withholding your taxes. Nobody is matching your Social Security. Nobody is setting up a retirement account for you. That's all on you.

The tradeoff is worth it, though. Independent contractors can write off expenses that W-2 employees can't touch, structure their income to cut self-employment tax, and access retirement accounts with contribution limits way beyond what most employer plans offer.

This guide walks through every tax decision a locum tenens physician needs to make in 2026 — quarterly payments, the S-Corp question, deductions, multi-state filing, and retirement planning. And if the thought of managing all this makes your head spin, we get it — that's why <a href="/why-locumsone">Locums One</a> connects our physicians with tax professionals who specialize in locum tenens at no extra cost.

1099 vs W-2: How Most Locum Physicians Get Classified

Most locum tenens physicians get a 1099-NEC at year-end, not a W-2. You're an independent contractor, not an employee of the staffing agency.

Here's what that means in practice:

• No tax withholding. The agency pays your full hourly rate. You're on the hook for setting aside money for federal income tax, state income tax, and self-employment tax.
• Self-employment tax. You pay both sides of Social Security and Medicare — a combined 15.3% on 92.35% of your net income. Social Security applies to the first $176,100 of net SE income in 2026. Medicare has no cap.
• Quarterly estimated payments. You pay taxes four times a year, not once in April.
• More deductions. You can write off business expenses that W-2 employees can't — travel, housing, licensing, CME, home office, and more.

Rule of thumb: Set aside 25% to 35% of your gross 1099 income for taxes. Where you land depends on your income level, filing status, deductions, and how many states you work in.

Some agencies offer W-2 arrangements, but most locum physicians work as 1099 independent contractors — and for good reason. The deduction advantages and income structuring options available to 1099 contractors typically outweigh the convenience of having someone else handle withholding.

Self-Employment Tax: The Number Nobody Warns You About

Self-employment tax is separate from income tax. It covers Social Security (12.4%) and Medicare (2.9%) — both halves of what would normally be split between you and an employer.

2026 rates:

Here's what it actually costs you:

Say you net $350,000 from locum work:

• SE income base: $350,000 × 92.35% = $323,225
• Social Security (12.4%): $176,100 × 12.4% = $21,836 (capped at the wage base)
• Medicare (2.9%): $323,225 × 2.9% = $9,374
• Additional Medicare (0.9%): $123,225 × 0.9% = $1,109 (the portion above $200K)
• Total SE tax: roughly $32,319

That's on top of your federal and state income tax. The silver lining: you get to deduct the employer-equivalent half (7.65%) from your adjusted gross income, which lowers your income tax bill.

This is exactly why so many locum physicians ask about the S-Corp structure.

Sole Proprietor vs S-Corp: When It Actually Makes Sense

As a sole proprietor — which is the default when you're a 1099 contractor — all your net income gets hit with self-employment tax. An S-Corp can reduce that, but the savings are more modest than often advertised.

How the S-Corp Works

You split your income into two buckets:

1. A W-2 salary you pay yourself — this gets hit with FICA taxes (15.3%)
2. Profit distributions — taxed as regular income but not subject to self-employment tax

The savings come from that second bucket. Every dollar paid as a distribution instead of salary skips the SE tax.

The Real Math: S-Corp vs Sole Prop at $350K

*Social Security maxes out at $176,100 no matter what structure you use. The S-Corp savings come mainly from dodging the 2.9% Medicare tax on distributions. At $350K with a $200K salary, the savings are real but modest once you factor in the cost of running an S-Corp (payroll service, separate tax return, bookkeeping).

As the White Coat Investor puts it: the S-Corp saves you roughly 2.9% on each dollar of distributions — about $2,900 per $100,000. But half of that is deductible, so the actual savings work out closer to $1,450 per $100,000. It adds up at scale, but it's not the massive tax hack some accountants pitch.

When an S-Corp Isn't Worth the Trouble

• You're earning under $100K from locums. The $1,500 to $3,000 in annual admin costs eat up most of the savings.
• You already have a W-2 job paying above the Social Security wage base. If your permanent position <a href="/blog/locum-tenens-salary">salary</a> exceeds $176,100, Social Security is already maxed. S-Corp savings shrink to just the Medicare difference.
• You only do locums a few weeks a year. The paperwork isn't justified for small amounts.

What "Reasonable Salary" Actually Means

The IRS requires S-Corp owners to pay themselves a reasonable salary for the work they do. For a full-time locum physician, that's usually $150,000 to $250,000 depending on specialty. If you set your salary at $50,000 while distributing $300,000, expect the IRS to come knocking.

The takeaway: If your net locum income consistently tops $200,000, have a conversation with a CPA about S-Corp election. The savings are real but more modest than often advertised — usually $2,000 to $6,000 per year after admin costs. Above $500K it gets more compelling. If you're doing locums part-time or earning under $150K, keep it simple and stay a sole proprietor.

Every Deduction Available to Locum Tenens Physicians

If you paid for it, it's not reimbursed by your agency, and it's related to your locum work, you can probably deduct it. Here's the full rundown:

Travel

• Airfare to and from assignments
• Rental cars, rideshares, taxis
• Parking and tolls
• Mileage at the IRS standard rate (72.5 cents per mile in 2026) if you drive your own car
• Baggage fees

This is important — the "tax home" rule: Travel deductions only work if you're away from your "tax home" on a temporary assignment expected to last less than a year. Your tax home is wherever your main place of business is, or where you keep a permanent residence.

If an assignment goes past one year (or was expected to from the start), that location becomes your new tax home and travel deductions disappear. And here's the part that catches people: if you don't maintain any permanent residence and just hop from assignment to assignment, the IRS can classify you as an "itinerant worker" with no tax home. That kills all your travel deductions. Even keeping a rented apartment somewhere is enough to preserve them.

Housing and Lodging

• Hotel or Airbnb costs when the agency doesn't provide housing
• Apartment rent during assignments
• Utilities at temporary housing

If the agency provides your housing, you can't deduct it. If they give you a housing stipend and you find your own place, the stipend counts as taxable income but you can write off the actual housing costs.

Meals

• 50% of what you actually spend on meals while traveling for work, OR
• 50% of the IRS per diem meal rate for your assignment location
• 2026 per diem rates: $86/day in high-cost areas, $74/day in standard areas

The per diem route is easier — you skip tracking individual receipts and just log which days you worked at each location.

Licensing and Credentialing

• State medical license fees (every state where you hold one)
• DEA registration
• Board certification and recertification fees
• <a href="/blog/credentialing-101">Credentialing</a> costs your agency doesn't cover
• IMLC (Interstate Medical Licensure Compact) application fees

Continuing Medical Education

• Course fees, conference registrations
• Travel to CME events (airfare, hotel, meals)
• Online CME subscriptions
• Medical journals, UpToDate, and reference materials

Malpractice Insurance

• Deductible if you're paying for your own policy
• Most agencies cover malpractice during assignments, so there's nothing to deduct in that case
• Tail coverage premiums count if you're paying them yourself

Health Insurance

• Self-employed health insurance deduction for premiums covering you, your spouse, and dependents
• This reduces your AGI directly — it's an above-the-line deduction
• Covers medical, dental, vision, and long-term care premiums

HSA Contributions

• 2026 limits: $4,300 (individual) / $8,750 (family) — check irs.gov for the latest, as these adjust each year
• You need a high-deductible health plan (HDHP) to qualify
• Triple tax benefit: deductible going in, grows tax-free, comes out tax-free for medical expenses

Home Office

• Has to be a dedicated space used only for your locum business — scheduling, <a href="/blog/credentialing-101">credentialing paperwork</a>, CME
• Simplified method: $5 per square foot, up to 300 square feet ($1,500 max)
• Actual method: calculate the percentage of your home the office occupies, then deduct that share of rent/mortgage, utilities, and internet

Professional Expenses

• Society dues (AMA, specialty societies, NALTO)
• Scrubs and lab coats (if not provided)
• Stethoscope, medical instruments, equipment
• Laptop, phone, and work accessories
• Business phone line or the work percentage of your personal phone
• Tax prep and CPA fees

Quarterly Estimated Tax Payments

If you're going to owe $1,000 or more in taxes for the year — and as a full-time locum physician, you will — you need to make quarterly estimated payments.

2026 due dates:

How to Avoid Underpayment Penalties

Use one of these safe harbors:

• 100% of last year's total tax liability, split into four equal payments, OR
• 110% of last year's total tax liability if your prior-year AGI was over $150,000 — this is the one most locum physicians should use, OR
• 90% of this year's tax liability

The simplest approach: pull last year's total tax (line 24 on your 1040), multiply by 1.10, divide by four, and send that amount each quarter. Even if you earn a lot more this year, you won't owe a penalty.

How to pay: IRS Direct Pay (directpay.irs.gov), EFTPS, or mail a check with Form 1040-ES. Most CPAs recommend EFTPS because it's easier to track.

Multi-State Taxes: Filing in Every State Where You Worked

This is where locum taxes get messy. You need to file a nonresident state return in every state where you earned income, with a few exceptions.

States with no income tax — no return needed:

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming

Every other state where you took an assignment? You're filing a nonresident return.

Your home state taxes all your income regardless of where you earned it. But most states give you a credit for taxes paid to other states, which prevents actual double taxation.

Example: You live in Georgia (5.49% top rate) and take a two-month assignment in California (13.3% top rate). You pay California nonresident tax on the income earned there. Georgia credits you for the California tax, and since California's rate is higher, you end up owing nothing extra to Georgia on that income. Whatever you earned in Georgia gets taxed at the Georgia rate.

Some practical advice:

• Picking assignments in no-income-tax states (Texas, Florida, Nevada, Washington) is the simplest way to keep more of your money
• Track exactly which days you worked in each state — your tax liability in each state is usually based on days worked there divided by your total work days
• Get a CPA who handles multi-state physician filing. This is not something you want to figure out with TurboTax when you've worked in five states.

Physicians who work with <a href="/why-locumsone">Locums One</a> get connected to tax professionals experienced in multi-state locum tenens filing — free of charge. It's one of the things we do to make sure our docs keep more of what they earn.

The QBI Deduction in 2026: What Changed

The Qualified Business Income deduction lets eligible business owners knock a percentage of their business income off their taxable income. The One Big Beautiful Bill Act (signed July 2025) made this deduction permanent and bumped the rate from 20% to 23%.

The problem for physicians: Medical practices fall under "Specified Service Trades or Businesses" (SSTBs). For SSTBs, the QBI deduction phases out at higher income:

What this means for you: If you're single and earning $300K+ from locum work, you're past the phase-out and get nothing from QBI. Married physicians with a lower-earning spouse might keep taxable income within the range. Same for part-time locum physicians or those with big enough deductions to stay under the threshold.

If you're married filing jointly with taxable income under $394,600, the QBI deduction could save you $10,000 to $20,000. Worth bringing up with your CPA.

Retirement Accounts: Solo 401(k) vs SEP-IRA

One of the biggest advantages of being an independent contractor is access to retirement accounts with much higher contribution limits than standard employer plans.

Solo 401(k) — The Right Choice for Most Locum Physicians

Why the Solo 401(k) wins:

• Higher total contributions than a SEP-IRA at most income levels, thanks to the employee deferral piece
• Roth option for after-tax contributions
• You can borrow against your balance
• Doesn't mess up your Backdoor Roth IRA

You need to open one by December 31 of the tax year you want to contribute for.

SEP-IRA — Easier to Set Up, but There's a Catch

You can open a SEP-IRA at Fidelity or Schwab in about 15 minutes. But it comes with a serious drawback for high-income physicians:

Having a SEP-IRA balance triggers the pro-rata rule, which effectively ruins your Backdoor Roth IRA. If you're a high earner relying on the Backdoor Roth strategy — and you probably should be — avoid SEP-IRAs.

SEP contributions are also employer-only. There's no employee deferral, so your total contributions end up lower than a Solo 401(k) at most income levels.

Backdoor Roth IRA

• 2026 limit: $7,500 ($8,600 if you're 50+)
• Works at any income level when done as a conversion
• Pairs cleanly with a Solo 401(k)
• A must for high-income physicians who are over the direct Roth IRA income limits ($165,000 single / $246,000 married filing jointly for 2026)

Cash Balance Plan — For the High Earners

If you're consistently bringing in $400,000+ and want to shelter more than $72,000 a year, a cash balance plan lets you stash away $100,000 to $300,000+ annually in tax-deferred contributions. It needs actuarial administration and costs $2,000 to $5,000 a year to run, but the tax savings at high income levels can be significant.

A Few More Strategies Worth Knowing

529 Plans for Credentialing and Licensing

As of 2025, 529 education savings plans can cover professional <a href="/blog/credentialing-101">credentialing</a> and licensing exam fees. If you're paying for new state medical licenses or board recertification out of pocket, 529 funds are an option — contributions grow tax-free and qualified withdrawals come out tax-free.

Hiring Your Kids or Spouse

If you have an S-Corp, you can put family members on payroll for real business work — scheduling, filing, bookkeeping, managing your social media. Children under 18 working for a sole proprietorship are exempt from Social Security and Medicare tax on their wages. Pay a child up to the standard deduction ($15,700 in 2026) and they owe zero federal income tax. You get the business deduction.

Pass-Through Entity Tax Elections

A growing number of states let S-Corps and partnerships elect to pay state income tax at the entity level. This is a workaround for the $10,000 SALT deduction cap — effectively letting you deduct state taxes that would otherwise be limited on your personal return. California, New York, New Jersey, and many other states offer this. Ask your CPA if it applies to you.

Tax Planning Checklist

When you start locum work:

• Set aside 30% of every payment into a tax savings account
• Talk to a CPA about whether an LLC or S-Corp makes sense
• Open a Solo 401(k) before December 31 of your first year
• Set up a separate business bank account
• Register for EFTPS for quarterly estimated payments

Each quarter:

• Pay your quarterly estimated taxes by the deadline
• Track days worked in each state
• Log travel days, assignment locations, and work dates

All year long:

• Keep receipts for every unreimbursed business expense
• Track mileage if you're driving your own car
• Hold onto records for CME courses, licensing fees, and professional dues
• Max out your Solo 401(k) and Backdoor Roth IRA

At tax time:

• File your federal return (Form 1040 + Schedule C, or 1120-S if you have an S-Corp)
• File nonresident returns in every state where you worked
• File your resident state return with credits for taxes paid elsewhere
• Sit down with your CPA and look at what you can do better next year

The Bottom Line

Locum tenens physicians who stay on top of their taxes keep a lot more of what they earn. The core moves:

1. Track every deduction. Travel, housing, meals, licensing, CME, health insurance — these add up to tens of thousands in savings.
2. Think about S-Corp election once your net locum income passes $200,000 consistently. Net savings of $2,000 to $6,000 a year after admin costs, and it grows at higher incomes.
3. Open a Solo 401(k) and max it out. Up to $72,000 a year in tax-deferred contributions, and it won't wreck your Backdoor Roth.
4. Pay quarterly estimates using the 110% safe harbor. Keeps you penalty-free with minimal thinking.
5. Get a CPA who knows physician taxes. Multi-state filing alone makes it worth every dollar.

The gap between a physician who manages their taxes well and one who doesn't can easily be $30,000 to $50,000 a year in money left on the table. At locum income levels, professional tax planning pays for itself several times over.

Frequently Asked Questions

How do I file taxes as a locum tenens physician?

You'll file a federal return (Form 1040 with Schedule C, or 1120-S if you have an S-Corp) reporting your 1099 income, plus a nonresident state return in every state where you worked on assignment. You're also responsible for quarterly estimated tax payments throughout the year. Most locum physicians set aside 25-35% of their gross income for taxes.

What can I deduct as a 1099 locum tenens doctor?

Travel (airfare, rental cars, mileage at 72.5 cents/mile), housing during assignments, 50% of meals, state licensing fees, DEA registration, board certification, CME courses, malpractice insurance (if you pay it yourself), health insurance premiums, home office expenses, and professional dues. The key requirement: the expense must be unreimbursed by your agency.

Should I form an S-Corp for locum tenens work?

It depends on your income. Below $200K net, the administrative costs ($1,500-$3,000/year) usually eat up the savings. Above $200K, you can save $2,000-$6,000 per year on self-employment tax. Above $500K the savings become more significant. Talk to a CPA who works with physicians before making the switch.

Do I have to file taxes in every state where I worked locums?

Yes, with exceptions. You must file a nonresident return in every state where you earned income, unless that state has no income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming). Your home state taxes all your income but gives you a credit for taxes paid to other states.

What's the best retirement account for a locum tenens physician?

A Solo 401(k). It offers higher contribution limits than a SEP-IRA ($72,000 combined max in 2026), includes a Roth option, allows loans, and doesn't interfere with the Backdoor Roth IRA strategy. Avoid SEP-IRAs if you're doing Backdoor Roth conversions — the pro-rata rule will create problems.

How much should I set aside for taxes as a 1099 locum physician?

A safe starting point is 30% of every payment. Depending on your state tax situation and deductions, you may need more or less. Use the 110% safe harbor rule for quarterly estimates — pay 110% of last year's total tax liability divided into four equal payments and you'll avoid underpayment penalties regardless of how much you earn this year.

We Handle This for Our Physicians

Taxes shouldn't be the reason you avoid locum tenens — or the reason you leave money on the table once you start. At <a href="/why-locumsone">Locums One</a>, our physicians get complimentary access to tax professionals who specialize in 1099 locum tenens income, multi-state filing, entity structuring, and retirement planning. We'll connect you with the right people, walk you through the setup, and make sure you're not overpaying.

It's part of how we take care of our docs — not just finding you the right assignments, but making sure the business side of locums works for you too.

<a href="/contact">Talk to Our Team</a>