Locum Tenens & Taxes: What Clinicians Need to Know (and How to Turn Flexibility into Financial Advantage)

Working locum tenens often means higher pay and more freedom—and a different tax playbook. Most assignments pay you as a 1099 independent contractor, which shifts you from “employee withholding” to running a small business. That can feel daunting, but it unlocks deductions, retirement strategies, and planning moves that W-2 roles can’t match.

1) Your “Tax Home,” Temporary Assignments & Travel Deductions

The IRS cares where your tax home is (your main place of business, not necessarily your family home). If you have no regular place of business, you can be deemed itinerant—and lose many travel deductions. Keep a clear tax home to preserve write-offs. IRS

Travel costs are deductible only when you’re away from your tax home on a temporary assignment (generally expected to last < 1 year). Self-employed clinicians may use the standard meal allowance (per diem for meals & incidentals) but not a lodging per-diem; lodging must be actual cost. Meals are generally 50% deductible. IRS+1

Locum-specific guidance echoes this: actual housing can be deducted if not provided, and only the meals/incidental per diem (not lodging per diem) applies. Locumstory

Pro tip: If you routinely return to your home between stints, maintain records showing your main business base and that each out-of-town engagement was temporary. IRS

2) Self-Employment Tax (SE tax) & the 0.9% Additional Medicare Tax

As a contractor, you pay SE tax of 15.3% (12.4% Social Security + 2.9% Medicare), with Social Security applied up to the 2025 wage base of $176,100; Medicare has no cap. High earners may also owe the additional 0.9% Medicare tax over income thresholds ($200k single/$250k MFJ). IRS+1Social Security

3) Deductions Most Locums Miss

• Unreimbursed travel (airfare, mileage, lodging), 50% of meals, baggage, taxis/rideshare, parking—when away from your tax home on temporary assignments. Keep a log. IRS
• Licensing, DEA/CSR, CME, malpractice, equipment, EHR subscriptions, and a home office if used regularly and exclusively as your principal place of business (which can also make trips from home to temporary sites deductible). IRS+1
• Per diem for meals (M&IE) may simplify record-keeping; lodging must be actual. IRStaxaudit.com

4) Retirement: Big Pre-Tax Buckets

Contractors can shelter substantial income:

• Solo 401(k): 2025 employee deferral up to $23,500 (plus catch-up if eligible) + employer contribution, subject to the overall annual additions limit of $70,000. IRSThomson Reuters Tax
• SEP-IRA: generally up to ~20% of net SE earnings (same overall limit applies). (IRS solo-401(k) page lists 2024 figures and mechanics; 2025 updates increase the cap.) IRS

Planning edge: Solo 401(k) often beats SEP for higher deferrals at modest incomes because you can add the employee portion on top of employer profit-share.

5) The QBI (Section 199A) Deduction—Sometimes

Many pass-through businesses get up to a 20% Qualified Business Income deduction. Health care is a “specified service trade or business,” so the deduction phases out at higher incomes—but is available below IRS income thresholds. Check current limits and filing status impacts. IRS+1Thomson Reuters TaxBarnes Dennig

6) Multi-State Returns Are Common

Working locums across state lines? Expect nonresident state returns where you earn income. Some agencies publish checklists to help you track obligations—use them, but verify with a CPA. Weatherby Healthcare

Action Plan for New (and Busy) Locums

1. Pick a bookkeeping system (separate bank/credit card, categorize monthly).
2. Document your tax home and keep a travel log (dates, purpose, location, receipts or per-diem for meals). IRS
3. Set aside taxes (SE + income tax) and pay quarterly estimates (Form 1040-ES). IRS
4. Max a retirement plan (Solo 401(k) or SEP) to lower taxable income. IRSThomson Reuters Tax
5. Confirm QBI eligibility and entity choice with a pro. IRS

Bottom line: Locum tenens turns you into the CEO of a one-person practice. With a solid “tax home,” diligent records, and smart use of retirement accounts and QBI (when eligible), you can keep more of what you earn—without sacrificing the flexibility that drew you to locums in the first place.

This post is informational, not tax advice. Talk to a tax professional who knows physician/APP contracting.