1099 Physician and Locum Tenens Tax Planning

Estimated taxes

No one withholds tax from 1099 income. Pay quarterly estimates (April, June, September and January) to avoid penalties. For physicians with AGI over $150,000, the safe harbor is paying 110% of last year's total tax through withholding and estimates. Physicians with a W-2 job can also raise W-2 withholding to cover side income.

Self-employment tax

Net self-employment earnings are taxed at 12.4% for Social Security up to $184,500 (reduced by any W-2 wages) and 2.9% for Medicare on all earnings, plus the 0.9% Additional Medicare Tax above $200,000 single or $250,000 joint. Half of the self-employment tax is deductible.

Retirement plans for 1099 income

A solo 401(k) lets you contribute as employee (up to $24,500, shared with any other employer plan) and as employer (generally up to 20% of net self-employment earnings for sole proprietors, or 25% of W-2 pay from your S corporation), up to $72,000 in total. A cash balance plan can be added for larger contributions. See cash balance plans.

Locum tenens travel and the tax home rule

Travel expenses (airfare, lodging, rental cars, 50% of meals) are deductible only when you travel away from your tax home, which is generally your regular place of business. A locum physician with no regular base and no home where they incur duplicate living costs may be considered itinerant, with no deductible travel. Assignments expected to last more than a year at one location are generally treated as indefinite, not temporary. Agency-provided housing and travel are usually not deductible by you.

Common 1099 deductions

Licenses in every state where you work, DEA, board fees, CME, malpractice you pay yourself, credentialing costs, equipment, phone, software, professional dues, and a qualifying home office. See deductions list.

Should locums form an LLC or S corporation?

A single-member LLC adds liability separation but does not change tax by itself. An S corporation election can reduce self-employment tax once net income is high enough to cover reasonable salary, payroll, extra returns and state fees. For many locums, that point is somewhere above $100,000 to $150,000 of net 1099 income, but it depends on the state. See S corp guide.

Multi-state taxes

Locum physicians generally owe nonresident tax in each state where they perform work, and their home state taxes all income with a credit for tax paid elsewhere. Working in no-tax states (Texas, Florida, Nevada, Tennessee, Washington and others) reduces the paperwork but not your home-state tax. See the state guide.

This article is for general educational purposes and is not tax, legal or investment advice. Tax law changes often and its application depends on your facts. Figures reflect 2026 rules as published by the sources listed above. Consult a qualified professional before acting. See our editorial policy.