Locum Tenens Tax Strategies: Maximize Your Take-Home Pay

Locum tenens work offers healthcare providers flexibility, variety, and often higher hourly rates. But without proper tax planning, a significant portion of that income goes to taxes. Here's how to optimize your tax situation.

Understanding Your Tax Situation

As a locum tenens provider, you're typically classified as an independent contractor (1099). This means:

• You're responsible for all taxes (no employer withholding)
• You pay self-employment tax (15.3%)
• You can deduct business expenses
• You have more control over your tax planning

Entity Structure: Should You Incorporate?

Many locum providers benefit from forming an S-Corporation. Here's why:

• Pay yourself a "reasonable salary" subject to payroll taxes
• Take remaining profits as distributions (no SE tax)
• Potential savings of thousands in self-employment tax

Consult with a tax professional to determine if S-Corp election makes sense for your income level.

Travel Expense Strategies

Travel is a significant expense for locum providers. Maximize deductions by:

• Tracking all mileage to/from assignments
• Keeping receipts for lodging, meals, and transportation
• Using per diem rates when staying in temporary locations
• Deducting 100% of business travel (lodging, airfare)
• Deducting 50% of business meals

Retirement Planning

Take advantage of self-employed retirement plans:

• Solo 401(k): Contribute up to $69,000 in 2025
• SEP-IRA: Contribute up to 25% of net self-employment income
• Defined Benefit Plan: For high earners, contribute even more

The Home Office Advantage

If you handle administrative work, credentialing, or telemedicine from home, you may qualify for the home office deduction. This includes a portion of:

• Rent or mortgage interest
• Utilities
• Home insurance
• Repairs and maintenance

Timing Income and Expenses

As a cash-basis taxpayer, you have control over timing:

• Defer income to next year if you're in a high bracket
• Accelerate expenses into the current year for immediate deductions
• Prepay expenses like malpractice insurance or CME courses

Bottom Line: With proper planning, locum tenens providers can significantly reduce their tax burden while building wealth for the future. Consider working with a tax professional who specializes in healthcare providers.