An Extended Guide to Locum Tenens Taxes in 2025

TLDR: Locum tenens taxes require you to manage your own quarterly payments, track deductible expenses, and decide whether to incorporate as a business. Sounds complicated? It’s actually pretty straightforward once you know the steps.

Life in locums means more autonomy and flexibility– which also means taking control of your own finances. The financial part doesn’t have to be overwhelming, though. We’ve designed this guide to walk you through everything you’ll need to prep for tax season, including assessing your expenses and sorting out the pros and cons of hiring a tax professional to help.

Obligatory disclaimer: this is an informational blog and shouldn’t be considered tax advice for legal purposes. Make sure you talk to your tax advisor regarding any decisions about your locums employment.

Locum Tenens Tax Guide

• What is a 1099 Contractor?
• Paying locum tenens taxes
• Deductions for locum tenens taxes
• Should you set up a business entity?
• Should you hire a professional?
• What if you have a full-time job in addition to locums work?
• More FAQs
• Discover a new Era of locums

What is a 1099 Contractor?

Locum tenens professionals are built different. Unlike full time employees with W-2s, employers do not take taxes out of contractors’ pay. Instead, locums and other freelancers have to estimate and pay their own taxes. They’re what’s known as “1099 Contractors”, referring to the Internal Revenue Service 1099 form they use to report income. 

Everything You Need to Know about Paying Locum Tenens Taxes

As a contractor, you’ll need to make four (4) tax payments to the IRS over the course of the fiscal year to pay your federal and state taxes. Both are usually due around the same time. As a contractor, you should budget about 35% of your income to go toward taxes and keep receipts for deductible expenses. For those new to locums, you’ll want to set up everything you need for tax season prior to starting your assignment.

When Do I Pay Taxes as a Locum Tenens?

1099 contractors pay estimated taxes for the federal level on a quarterly basis. An estimated tax covers the total owed when combining income tax, self-employment tax and alternative employment tax. To pay your taxes, you’ll need to make four payments to the IRS before the 15th of the month in January, April, June and September.

For 2025 the estimated payment deadlines are:

• Q1 (for Q4 of 2024) January 15
• Q2 (1st 2025 payment) April 15
• Q3 June 15
• Q4 September 15

How Much Do I Pay in Taxes?

Ah, the tough question. To make sure the math is mathing, you’ll want to fill out an estimated tax form that breaks down your income tax, self employment tax and adjusted gross income. The best place to start is the form 1040 ES, which helps you to assess your estimated taxes.

From there, it’s critical to understand that you’ll pay for three different types of taxes: estimated income tax, self-employment taxes (they cover Medicare, Medicaid and Social Security contributions), and individual State taxes.

To pay your estimated and self-employment taxes, you’ll need to know a little bit about income brackets. As part of the process of filling out your 1040 ES form, you should identify 1) how you’ll be filing (as a single person or jointly with someone else) and 2) your net income. After this, you’ll want to look at the income levels below for each filing status. If the amount you’ve earned exceeds your tax threshold, you have to pay an additional .9% Medicare tax.

Here are this year’s tax brackets straight from the IRS website:

For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). The other rates are:

• 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
• 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
• 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
• 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
• 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
• 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).

And here are the income brackets for earners who need to pay an additional 0.9% Medicare tax:

• Married, filing jointly $250,000
• Married, filing separate $125,000
• Single $200,000
• Head of household (with qualifying person) $200,000
• Qualifying surviving spouse with dependent child $200,000

To pay your state-level taxes you’ll need to do a little more research as not every state does their taxes the same. Some states have a single-rate tax, and others have graduated tax rates. We recommend going through the IRS State government websites portal to find your state and click through the menu to reach your state’s tax payment portal.

Where Do I Pay Taxes?

Paying your taxes online is easy and quick if you go through the IRS Payments Site. There you’ll be able to make quarterly payments and find out more about additional payment methods including check by mail, same-day wire transfers and setting up a payment plan.

If you prefer to pay by mail, the process is also straightforward but with a couple additional steps. First, you can pay with a check, money order or cashier’s check and should make it out to
U.S. Treasury. Your check must include identification info which includes: your name, address, phone number, SSN or EIN, tax year and tax form or notice number. Keep in mind that checks should be sent to specific addresses depending on whether they are for an individual or business tax payment.

What Forms Are Used for 1099 Contractors?

• 1099 NEC - A non-employee compensation form that you will need from your clients to track total income from your locums contracting work.
• 1040-ES- The Estimated Tax For Individuals form, which lets you see a breakdown of the taxes you owe based on your gross income and calculate how much you’ll need to pay each quarter.
• Schedule C- A form where you can report income and list deductions for your incorporated business or sole proprietorship.

Everything You Need to Know about Deductions for Locum Tenens Taxes

As a locums contractor, you’ll have the opportunity to deduct up to 50% of your income. Here’s how it works.

When Do I Apply My Tax Deductions?

For contractors, deductions are like a little treat at the end of tax season. You should include your deductions as part of your regular tax preparation process. That means assessing what kind of deductions you’re eligible to make. The best place to start is the IRS page on deductions for individuals and for sole proprietors.

What Can I Deduct as a Locum Tenens?

• Stethoscopes, scrubs and white coats
• New technology: laptops, tablets and cell phones
• Retirement Savings (401k or SEP IRA)
• Health Insurance or HSA
• Professional fees (coaching, professional affiliations)
• Travel expenses

Deducting Travel Expenses

Deducting the cost of travel to your locums opportunity might be a key part of your tax prep. To do this, you’ll need proper documentation of travel such as plane, bus or train tickets, and/or gas receipts for your personal vehicle. If you’re traveling by car, you’ll need to remember that you can only deduct travel to and from work, and that the deduction rate is 65.5% of your total mileage or .655 cents per mile.

Deducting Health Expenses

Locums contractors who have a high-deductible health plan may be able to open a Health Savings Account (HSA). HSAs have tax benefits in terms of deductibility and autonomy when contractors do not have other forms of employer-provided insurance. So long as you are not covered by another plan, enrolled in Medicare or a dependent on someone else’s health insurance, you can open up an HSA to save funds for healthcare. Once you have your HSA, you’ll need to keep in mind the maximum annual contribution limit. For 2025 this limit is $4,500 for a single person and $8,550 for a family plan.

To deduct annual contributions during tax time, you should receive a Form 5498-A from your HSA provider. From there, you’ll need to report your deduction on Form 8889. This amount must be included on line 13 of Schedule 1, Part II of your Form 1040.

Deducting Bills and Fees

According to the IRS, conventions are deductible so long as they are immediately necessary for your business. Keep in mind, you’ll need to preserve all relevant documents such as meal receipts, travel tickets and conference fee receipts for your tax records. You can deduct up to 50% of your meals at conferences or business meals shared with clients. For more insights check the IRS page on travel deductions.

Retirement Deductions

Your yearly contributions to a retirement account might be deductible depending on the type you’ve chosen. A Roth IRA is a type of individual retirement account that you make contributions to with money that is taxed going in, but not taxed on future withdrawals once you reach the age of 59 ½ . Standard IRAs have less age-based withdrawal restrictions and you can make larger contributions, including up to 25% of your income. Contributions to traditional IRAs such as an SEP IRA for self-employed individuals are deductible whereas your Roth IRA is neither tax deductible nor reported on your income tax.

For other types of Self Employment Retirement Plans, tax deductibility varies. If you have a Solo 401k annual contributions to your plan are not taxable until you reach the age of 59 ½. The same is also the case for Simple IRAs. And lastly, if you have a Defined Benefit plan, your contributions are tax deductible but they require having an actuary take a look to figure out your deduction limit.

How Do I Keep Track of Expenses?

It’s important to remember that the IRS will not accept bank statements as proof of expenses, so you need to keep track of all pertinent receipts for your locums business.

The best way to stay on top of expenses is to have a budget and a filing system. It doesn’t have to be complicated. Some physicians prefer to keep physical receipts so they can write notes about the context of the expense for documentation purposes. However, the easiest way is to use cloud storage on your computer to build a receipts and expenses folder. There you can organize and label digital receipts, and easily find the documentation you need for tax season.

Should I Set Up a Business Entity?

Locums physicians may choose to set up business entities as a means of mitigating legal liabilities and separating their personal and business assets. But, it’s important to know up front that the type of business entity you choose is going to shape your taxes, paperwork and liabilities.

There are two main types of business entities that locums set up: LLCs and sole proprietorships. Sole proprietorships are the most common type of business for locums because they can be easily run by an individual and your tax responsibilities aren’t super complicated. One perk to consider for this type is that unlike incorporated businesses, as a sole proprietor you don’t have to pay corporate tax in addition to income tax. On the flipside, because sole proprietorships are considered unincorporated by the IRS, the individual owner carries all the legal liabilities of the business themself. This means that in contract disputes, in case of injury or incurrence of debt, you, the individual owner, are liable.

Limited Liability Companies (LLCs) are also not considered to be incorporated, but they have legal benefits that make them appealing to certain locums professionals. LLCs have one or more owners, defined articles of organization and a larger amount of documentation needs and responsibilities. Unlike with sole proprietorships, you can choose whether the IRS taxes you as an individual or the LLC itself. But the main benefit of an LLC is the way it limits personal liability, meaning that in case of dispute, injury or debt the liability falls on the business rather than the individual owner. However, be aware that the security LLCs provide has a tax trade-off, with higher tax responsibilities and fees.

Should I Hire a Professional to Do My Locum Tenens Taxes?

Hiring a professional is a great option if you’re balancing several different contracts in a given year or if your taxes are complicated. However, it can be costly and you’ll want to look for someone who specializes in tax preparation for medical professionals.

If you have between one and three contracts in the fiscal year, you may want to consider preparing your taxes at home and with the help of tax preparation software like TurboTax. This option is significantly less costly, and easy to navigate for the locums pro on the go.

What If I Have Full Time Employment in Addition to Locums Work?

As a contractor who also holds a full-time position, you will need to pay self-employment taxes for your locums contracting work. This means you’ll pay that 15.3% Self Employment tax on 92.35% of your income above the $400 threshold. That tax is in addition to income tax on your gross yearly earnings.

As a sole proprietor, you’ll also want to file a schedule C form along with your 1040 tax form. This will allow you to write off expenses.

More FAQs about Locum Tenens Taxes

Still have more questions? Our Era recruiters get a lot of them from physicians just like you. Whether you’re a first time locums or an experienced contractor, there’s always more to find out about contractor taxes. We’ve got you covered.

How much should a 1099 put away for taxes?

You should set aside between 35-40% of your income for state and federal taxes, even if you plan to take deductions. This will ensure you don’t face any surprise penalties or fees.

How do I avoid owing taxes on my 1099?

By making the correct quarterly payments for your estimated taxes on the IRS website. If you are unsure, consider overpaying slightly in order to avoid owing additional taxes later on.

Are taxes higher for 1099 or W-2?

Taxes for 1099 contractors are higher than W-2 employees because of self-employment taxes which include payments to Medicare and Social Security. But this higher tax rate is offset by the ability to deduct critical working expenses.

How much can you make on a 1099 before you have to claim it?

All income made after $400 is considered taxable. However, according to the 2024 rates the first $168,600 of your total earnings fall under the self-employment tax.

Let Us Help You Navigate Locum Tenens Taxes

Taxes can be complicated and we want you to be able to get back to what you do best: stellar patient care. When you work with Era Locums, we provide expert guidance on all aspects of your journey -- browse our open positions or reach out and we'll get started.