Physician Locum Tenens Taxes: Quarterly Taxes, Mileage, and Deductions

Quick Answer

Locum tenens physicians typically receive 1099 income (not W-2) and must pay quarterly estimated taxes to avoid IRS penalties. You'll owe approximately 37%–45% of gross income in combined federal, state, self-employment taxes, and Medicare. Common deductions include mileage, housing, meals, CME, and professional fees. Use the quarterly tax calculator to determine exact payment amounts based on your state.

What Is Locum Tenens and Tax Classification

Locum tenens (Latin: "temporary substitute") is short-term physician work arranged through a staffing agency. Typical assignments are 2 weeks to 6 months. Unlike direct employment (W-2), locum tenens physicians are independent contractors and receive 1099-NEC or 1099-MISC forms at year-end.

Key tax difference:

• W-2 employee: Employer withholds income tax, Social Security, Medicare. You file 1040 and get a refund or owe a small amount.
• 1099 locum: You receive gross income, owe all taxes yourself, and must pay quarterly.

Tax burden for a locum tenens physician earning $150,000:

Note: You can deduct half of self-employment tax, reducing the effective burden slightly.

2026 Quarterly Tax Payment Schedule

The IRS requires estimated tax payments four times per year. Missing a quarter can result in penalties and interest.

2026 Quarterly Due Dates:

How to calculate quarterly payment:

If you estimate $150,000 in gross locum income:

• Federal income tax: ~$33,000 ÷ 4 = $8,250/quarter
• Self-employment tax: ~$12,900 ÷ 4 = $3,225/quarter
• State tax (varies): ~$5,000 ÷ 4 = $1,250/quarter
• Total quarterly payment: ~$12,725/quarter or ~$50,900/year

Pro tip: Use IRS Form 1040-ES to calculate and make payments at irs.gov or via EFTPS (Electronic Federal Tax Payment System).

Maximizing Deductions for Locum Tenens Physicians

Unlike employed physicians, you can deduct legitimate business expenses from your 1099 income, reducing your taxable income and tax liability.

Mileage Deductions

The IRS standard mileage rate for 2026 is 20.5 cents per mile. Track all business miles:

Deductible miles:

• Driving to/from temporary assignments
• Driving between agencies or hospital assignments
• Driving to CME or medical conferences

Non-deductible miles:

• Commuting from home to your primary residence (personal)
• Leisure travel
• Meals and entertainment (separate deduction)

Example: You work 20 locum assignments over the year, averaging 50 miles per assignment:

• 20 assignments × 50 miles = 1,000 miles
• Deduction: 1,000 miles × $0.205 = $205 deduction (modest, but it adds up)

Better option: If you have a high-mileage year (e.g., 5,000+ miles), use "actual expense" deduction (fuel, maintenance, insurance, depreciation) instead of standard mileage. Track receipts.

Housing Deductions

If you stay in temporary housing for a locum assignment, the cost may be deductible:

Deductible housing:

• Temporary rental housing for the duration of your assignment
• Per diem allowance from the agency (may be non-taxable; see below)
• Airbnb, hotel, or temporary apartment

Non-deductible:

• Your primary residence mortgage or rent
• A condo you own at your home base

Important: If your agency provides housing as part of your compensation, it may be non-taxable housing allowance under Section 119. Confirm with the agency whether it's taxable or non-taxable. Non-taxable housing reduces your gross income and self-employment tax liability significantly.

Example: Agency pays you $8,000/month locum salary + $2,000/month housing allowance (non-taxable). Your taxable income is $8,000, not $10,000. You save ~20% in self-employment tax on that $2,000.

Meals and Incidental Expenses (M&IE)

If you're away from your tax home on an overnight assignment, meal expenses are 50% deductible.

Deductible:

• Meals during locum assignments away from home
• Restaurant meals during temporary work periods
• Per diem allowance from the agency (often non-taxable up to IRS limits)

Example: 4-week assignment with $60/day meal costs = $1,680 meals. Deduction = $1,680 × 50% = $840 deduction.

Tax home rule: You must have a "tax home" (primary residence where you intend to return). If you have no permanent home and move constantly, the IRS may deny meal deductions because you're not "away from home"—you're just moving. Maintain a primary residence if possible.

CME and Medical License Fees

These are fully deductible:

• Board certification or recertification fees
• Medical license renewal (all states)
• CME courses, conferences, and travel to attend
• Journal subscriptions
• Medical textbooks and online education
• DEA registration

Example: $2,000/year for CME + $500 board cert renewal + $200 DEA = $2,700 deduction, saving ~$750 in taxes at 28% marginal rate.

Agency and Professional Fees

• Recruitment agency fees or commissions (if paid by you, not the agency)
• Credentialing fees
• Licensing exam preparation (if not reimbursed)
• Professional liability insurance (see below for specifics)

Malpractice Insurance

Malpractice insurance is fully deductible as a business expense. For a locum tenens physician:

• Tail coverage when leaving an assignment: fully deductible
• Annual coverage: fully deductible

Example: $4,000/year malpractice coverage = $4,000 deduction, saving ~$1,100 in taxes.

Tax-Free Allowances from Locum Agencies

Some locum agencies offer tax-free allowances that don't count as taxable income if certain IRS conditions are met:

Potentially non-taxable:

• Housing allowance (up to fair market value for the location)
• Meals and incidental expenses per diem (up to IRS rates: ~$65–$200/day depending on city)
• Travel reimbursement (actual airfare, not personal per diem)

Confirm with your agency: Ask whether housing and meal allowances are taxable or non-taxable. Get it in writing. If non-taxable, your gross income is lower, and so is your self-employment tax.

Example impact:

• Taxable setup: $10,000 salary/month = $10,000 × 15.3% SE tax = $1,530/month self-employment tax
• Non-taxable setup: $8,000 salary + $2,000 non-taxable housing = $8,000 × 15.3% = $1,224/month self-employment tax
• Savings: $306/month or ~$3,670/year just from proper tax structuring.

Common Mistakes Locum Tenens Physicians Make

❌ Mistake 1: Not paying quarterly estimated taxes, then owing a huge tax bill in April ✅ Fix: Set up quarterly payments on IRS EFTPS or use an accounting software like QuickBooks Self-Employed. Automate payments.

❌ Mistake 2: Forgetting to deduct mileage and housing expenses ✅ Fix: Track mileage with a logbook or app (MileIQ, Stride Health). Save receipts for housing and meals.

❌ Mistake 3: Assuming housing allowance is non-taxable without confirming with the agency ✅ Fix: Email your recruiter asking: "Is the housing allowance taxable or non-taxable under Section 119?" Get it in writing.

❌ Mistake 4: Paying self-employment tax on non-taxable per diem ✅ Fix: Only pay SE tax on taxable salary. If the agency provides $2,000/month non-taxable housing, don't include it in your SE tax base.

❌ Mistake 5: Not filing quarterly taxes and incurring penalties ✅ Fix: Even if you underpay slightly, filing quarterly shows good faith and reduces penalties. Use Form 1040-ES.

Step-by-Step Locum Tenens Tax Checklist

• Determine your estimated annual gross 1099 income for 2026.
• Use the quarterly tax calculator to estimate federal, state, and self-employment taxes.
• Set up EFTPS or have your tax software auto-pay quarterly. Mark the due dates: April 15, June 15, Sept 15, Jan 18.
• Start a mileage log on day 1. Record all business travel (assignments, conferences).
• Save receipts for housing, meals, CME, and professional fees.
• Confirm with your agency whether housing and per diem allowances are taxable or non-taxable. Document in email.
• Consider S-corp election if your profit exceeds ~$40,000/year. Consult a CPA to compare SE tax savings.
• Work with a CPA familiar with locum tenens. The deductions and tax strategies are complex and worth the $1,500–$3,000 cost.

Frequently Asked Questions

Q: What if I work locum one month and W-2 employment the other 11 months? A: You'll have both 1099 and W-2 income. You'll need quarterly estimates only on the 1099 portion. Your W-2 withholding may cover some or all of the tax on the 1099 income if the employer withholds enough.

Q: Do I have to pay self-employment tax on locum income? A: Yes. As an independent contractor, you owe both employer and employee portions of Social Security and Medicare (~15.3% combined). You can deduct half of this.

Q: Can I deduct home office expenses as a locum? A: Typically no, because locums work on-site at hospitals. If you do credentialing or admin work from home, you can deduct a portion of home office expenses, but it's minor.

Q: What if I earn over $200,000 in locum income? Any additional taxes? A: Yes. You may owe Net Investment Income Tax (3.8%) if your modified AGI exceeds thresholds ($200,000 single, $250,000 married). Rare for locum physicians, but ask your CPA.

Q: Should I form an S-corp for locum income? A: Maybe. If your profit is $40,000+, an S-corp election can save $3,000–$6,000/year in self-employment tax. Cost is $1,500–$2,500/year to maintain (accounting, payroll). Break-even is around $40K profit.

Q: Is there a safe harbor for quarterly tax payments? A: Yes. If you pay 100% of your prior-year tax liability (or 110% if AGI >$150,000), you avoid underpayment penalties even if you underpay for 2026. Ask your CPA if this applies.