Locum Tenens Taxes: A Complete Guide for 1099 Clinicians

Most locum tenens assignments pay you as a 1099 independent contractor, not a W-2 employee — which means no taxes are withheld from your checks. You receive the full gross amount and are responsible for setting aside and paying every dollar of tax yourself. In IRS terms you are now self-employed: a one-person business that reports income and expenses on Schedule C and files an annual return plus quarterly estimated payments throughout the year.

This is the single biggest mental shift for clinicians coming from a salaried hospital or group job. As a W-2 employee, your employer withheld income tax, withheld your half of Social Security and Medicare, and paid the other half on your behalf. As a 1099 locum, you absorb all of it. (Some locum assignments — often agency-employed or hourly arrangements — are W-2 instead; for how to tell the difference and what changes, see 1099 vs W-2 locum tenens.)

The good news: 1099 status unlocks meaningful business deductions and far larger retirement-savings room than most employees get. The trade-off is that nothing happens automatically — you have to build the discipline to reserve cash and pay the IRS on a schedule.

A practical rule of thumb is to set aside roughly 25-35% of every locum check for taxes, then refine that against your actual situation. The exact percentage depends on your federal bracket, whether you work in a state with income tax, and how many deductions you have. Lower-income or heavily-deducted clinicians may land near the bottom of that range; high earners in a high-tax state will land at the top or above it.

The set-aside has to cover three stacking obligations: self-employment tax (the full 15.3% on most of your net), federal income tax (graduated brackets), and state income tax (zero in the seven states with no individual income tax, but meaningful elsewhere). A simple, safe habit is to move the reserve into a separate high-yield account the day each payment lands, so it is never spent and is ready when quarterly payments come due.

Treat the percentages below as directional, not a calculator — your exact number comes from a projection with your CPA, and the detailed mechanics of timing those payments live in the quarterly estimated taxes guide.

Locum tenens taxes break into four moving parts, plus a few cross-cutting layers (quarterly payments, multi-state filing, and entity choice) that sit on top of them. Understanding the four parts first is the fastest way to orient yourself; each links to a deep guide for the math and edge cases.

The four parts are: (1) self-employment tax — your full share of Social Security and Medicare; (2) income tax — federal brackets plus any state(s) you work in; (3) deductions — legitimate Schedule C business expenses that lower both your income tax and your SE tax; and (4) retirement — tax-advantaged accounts that shelter income while building your nest egg. Get these four working together and the cross-cutting layers become bookkeeping rather than mystery.

You owe self-employment (SE) tax on essentially all of your net locum profit, and for most clinicians it is the biggest tax surprise of going 1099. The SE tax rate is 15.3%: 12.4% for Social Security plus 2.9% for Medicare. As an employee you paid only half of this; as a contractor you pay both halves yourself, though half of what you pay is deductible above the line on your 1040.

A few mechanics matter. SE tax is computed on 92.35% of your net self-employment earnings, not 100%. The 12.4% Social Security portion only applies up to the 2026 Social Security wage base of $184,500 — earnings above that are not subject to the Social Security piece, though the 2.9% Medicare portion is uncapped and runs on every dollar. High earners also pay an Additional Medicare Tax of 0.9% on wages and SE income above $200,000 (single) or $250,000 (married filing jointly).

This is a summary; for worked examples, the half-SE deduction, and how an S-corp can reduce the SE-taxed portion of your pay, see the self-employment tax deep guide.

Yes, you can deduct legitimate business expenses on Schedule C — and because they reduce both your income tax and your self-employment tax, deductions are unusually valuable for 1099 clinicians. Common categories include malpractice premiums, CME, state licensing and DEA fees, professional dues, scrubs and required equipment, a qualifying home office, and travel and lodging tied to assignments. The 2026 business standard mileage rate is 72.5 cents per mile. The full list, substantiation rules, and gray areas live in the locum tenens tax deductions guide.

The 20% Qualified Business Income (QBI) deduction is the big exception, and it is the most common point of confusion. The deduction was made permanent by the One Big Beautiful Bill Act in 2025, but medicine is a specified service trade or business (SSTB), and the QBI benefit for an SSTB fully phases out above 2026 taxable income of $276,750 (single) or $553,500 (married filing jointly). The phase-out begins at the threshold amounts of $201,750 (single) and $403,500 (MFJ). Most full-time locum physicians, CRNAs, and AAs earn above the phase-out, so their QBI deduction is effectively $0. Do not plan around a QBI benefit you almost certainly will not get — and ignore the stale $553,500 MFJ / $276,750 single figures that some blogs still circulate; the correct 2026 SSTB phase-out completes at $553,500 / $276,750 per the IRS revenue procedure.

Because no tax is withheld from 1099 income, you generally must pay estimated taxes four times a year if you expect to owe at least $1,000 after credits and any withholding. For the 2026 tax year the due dates are April 15, 2026; June 15, 2026; September 15, 2026; and January 15, 2027. Miss them and the IRS charges an underpayment penalty even if you pay in full at filing.

The simplest way to avoid penalties is the safe harbor. You are protected if you pay either 90% of your current-year tax or 100% of last year's tax — but that last figure rises to 110% if your prior-year adjusted gross income exceeded $150,000. Because most full-time locum clinicians clear $150,000 of AGI, the 110% rule is the one that applies to you. Pay at least 110% of last year's total tax in even quarterly installments and you are safe even if this year's income jumps.

This is the summary; for state estimates, annualizing uneven income, and how to handle a big first 1099 year, see the quarterly estimated taxes guide.

Working locum assignments in more than one state usually means filing a nonresident income tax return in each income-tax state where you physically worked and exceeded that state's de-minimis threshold, plus your resident return at home. The key relief is that your home (resident) state gives you a credit for income taxes paid to other states — so you are not taxed twice on the same income. Note that the credit prevents double taxation; it does not eliminate the requirement to file in each state.

Two details trip clinicians up. First, de-minimis nonresident-filing thresholds vary by state — some require a return after a single day of work, others have dollar or day thresholds — so a short assignment can still create a filing obligation. Second, seven states have no individual income tax at all (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming; New Hampshire taxes only interest and dividends), so working there simplifies things considerably.

Multi-state work also intersects with licensing speed via the Interstate Medical Licensure Compact (IMLC), which covers roughly 45 member jurisdictions as of mid-2026 with about a 19-day average issuance and a $700 application fee (verify the current member count, as it changes). For the full filing mechanics, apportionment, and the resident-credit math, see the multi-state taxes guide.

Not necessarily, and not right away. As a sole proprietor or single-member LLC, all of your net locum profit is subject to self-employment tax. An S-corp election changes that: you split your pay into a reasonable W-2 salary (subject to payroll tax) plus distributions (not subject to SE or payroll tax). The savings come from the distribution portion, net of the added payroll, bookkeeping, and tax-prep costs — and S-corps draw more IRS scrutiny, so the reasonable-salary determination has to be defensible.

As a rough guide, an S-corp is commonly considered once net locum income reaches roughly $150,000-$200,000 or more, where the SE-tax savings start to outweigh the compliance overhead. But two caveats matter: PLLC and S-corp recognition rules vary by state (some states do not let physicians use a standard LLC, requiring a professional entity instead), and S-corp W-2 wages can re-trigger the mandatory-Roth catch-up rule and become the base for your retirement contributions.

An LLC by itself is a liability and organizational wrapper, not a tax-savings device — it is taxed like a sole proprietor unless you also elect S-corp treatment. For the structure decision, see forming an LLC and the S-corp guide; you will also want a business bank account and EIN regardless of entity choice.

One of the biggest upsides of 1099 status is dramatically more retirement-savings room than most employees get. A solo 401(k) or SEP-IRA lets you shelter a large share of your locum income. For 2026, the total annual addition limit under §415(c) is $72,000 (before catch-up). In a solo 401(k) that combines an employee elective deferral of $24,500 with employer (profit-sharing) contributions; the age-50 catch-up adds $8,000, and a special ages 60-63 super catch-up reaches $11,250.

Two rules deserve a flag. First, under SECURE 2.0, if your prior-year FICA (Social Security) wages from the plan-sponsoring employer exceeded $150,000, your catch-up contributions must be Roth rather than pre-tax. This is measured employer-by-employer on W-2 wages, so it mainly affects S-corp owners who pay themselves a W-2 salary — a pure 1099 sole proprietor with no W-2 wages is generally not caught. (The IRS final regulations formally apply to tax years beginning after December 31, 2026, but plans may implement the requirement for 2026 under a good-faith interpretation, and many already have.) Second, a SEP-IRA balance counts in the pro-rata calculation that can complicate backdoor Roth contributions, whereas a solo 401(k) does not — a meaningful difference if you do backdoor Roths.

For plan selection, contribution math, and the backdoor-Roth interaction, see the retirement guide.