Locum Tenens Tax Deductions 2026: What 1099 Physicians Can Actually Write Off

Locum tenens physicians operating as 1099 independent contractors have access to a significant range of business deductions that employed physicians cannot claim. The tradeoff for that flexibility is self-employment tax, multi-state filing complexity, and the need to document everything correctly. This guide covers the core deductions available to 1099 locum physicians in 2026 — what qualifies, how the math works, and where the rules are specific enough to warrant CPA verification before filing.

1. How 1099 Locum Taxation Works

Locum physicians paid as independent contractors receive 1099-NEC forms from agencies rather than W-2s from employers. This means no employer withholding — the physician is responsible for estimated quarterly tax payments — and no employer-paid half of payroll taxes. The full 15.3% self-employment tax falls on the physician, covering both the employee and employer portions of Social Security and Medicare.

The upside is Schedule C. As a self-employed individual, a locum physician can deduct ordinary and necessary business expenses from gross income before calculating taxable income. The scope of allowable deductions is significantly broader than what a W-2 employee can claim — and for a physician with $300,000 or more in annual locum income, the difference between capturing all available deductions and missing the major ones can be $20,000 or more in taxable income annually.

Entity structure matters. A locum physician operating as a sole proprietor files Schedule C directly. A physician who has elected S-Corp status files differently — some deductions that flow through Schedule C for a sole proprietor are handled at the entity level for an S-Corp. The S-Corp election changes the mechanics of several deductions covered in this guide, and those differences are noted where relevant. See the LPG S-Corp guide for the full framework on whether the election makes sense for your income level.

2. Core Schedule C Deductions

The following categories represent the most commonly applicable and most significant deductions for 1099 locum physicians. Documentation requirements apply to all of them — the IRS expects substantiation for business expense deductions, and locum physicians operating across multiple states with variable assignment income are not a low-audit-risk population.

Malpractice insurance premiums: Malpractice coverage paid by the physician directly — whether occurrence or claims-made, including tail coverage — is a business expense deductible on Schedule C. If your agency pays malpractice and includes it in your compensation structure, the treatment depends on how it is documented. Confirm the coverage structure with your agency and your CPA to ensure the deduction is being captured correctly.

Medical licensing fees: State medical license fees, DEA registration fees, and credentialing-related fees paid in connection with your locum practice are deductible business expenses. Physicians licensed in multiple states — common in the locum context — can deduct each state’s licensing fees as a business expense. Keep records of each fee paid, the state it applies to, and the business purpose.

Continuing medical education: CME expenses directly related to maintaining your medical license and professional qualifications are deductible. This includes registration fees, course materials, and travel to CME events. CME that qualifies you for a new specialty or career change is treated differently — deductibility is strongest when the CME is required to maintain existing licensure or skills in your current practice area.

Professional dues and subscriptions: Dues to specialty societies, medical associations, and professional organizations are deductible. Subscriptions to medical journals, clinical reference tools, and professional publications used in your practice qualify as well. Personal subscriptions that overlap with professional use require allocation — only the business use portion is deductible.

Business software and technology: Electronic health record access fees, telemedicine platform subscriptions, medical reference apps, billing software, and other technology tools used in your locum practice are deductible. A smartphone or tablet used for business purposes can be partially deducted based on the percentage of business use — document the allocation method.

Home office deduction: A locum physician who uses a dedicated space in their home exclusively and regularly for business — administrative work, credentialing, contract review, billing — can claim the home office deduction. The space must be used exclusively for business; a bedroom that doubles as a home office does not qualify. The deduction can be calculated using the simplified method ($5 per square foot, up to 300 square feet) or the actual expense method based on the percentage of home square footage used for business. The actual expense method typically produces a larger deduction for physicians with higher housing costs.

Professional liability and business insurance: Business insurance premiums beyond malpractice — general liability, professional indemnity, disability insurance in some circumstances — may be deductible depending on the coverage type and business use. Confirm with a CPA which policies qualify under your specific entity structure.

3. Travel and Mileage

Assignment-related travel is one of the larger deduction categories for locum physicians and one of the more documentation-intensive. The IRS distinguishes between commuting (not deductible) and business travel (deductible), and for locum physicians with a qualifying tax home, assignment travel falls on the deductible side of that line.

The tax home requirement: To deduct assignment travel expenses, a locum physician must have a qualifying tax home — a regular place of business or primary place of residence to which they return between assignments. A physician who has no fixed home base and travels continuously may not qualify for the travel deduction and may also lose the ability to receive agency stipends tax-free. Losing tax home status does not just eliminate the travel deduction — it makes agency housing stipends taxable income, which can represent $10,000 or more in additional taxable income per assignment. See the LPG housing stipend guide for the full tax home framework.

Deductible travel expenses: For physicians with a qualifying tax home, assignment-related travel expenses include flights, lodging, rental cars, rideshares, parking, tolls, baggage fees, and meals at the applicable IRS per diem rate. Business travel meals are generally deductible at 50%. Keep receipts and document the business purpose for each expense — assignment location, dates, and the business connection.

Standard mileage rate: The IRS standard mileage rate for business use of a vehicle is 72.5 cents per mile for 2026 (IRS Notice 2026-10), up 2.5 cents from 2025. This rate applies to gasoline, hybrid, and electric vehicles. To use the standard mileage rate, you must track business miles driven — a mileage log app is the most reliable documentation method. Alternatively, you can deduct actual vehicle expenses (fuel, insurance, maintenance, depreciation) based on the percentage of business use, though the standard mileage rate is simpler to administer for most physicians.

What does not qualify: Commuting miles between a personal residence and a regular workplace are not deductible. For locum physicians, the line between deductible assignment travel and non-deductible commuting depends on the tax home analysis — confirm with a CPA if there is any ambiguity about your specific situation.

4. Retirement Contributions

Retirement accounts are among the most powerful tax reduction tools available to 1099 locum physicians. Contributions reduce taxable income dollar-for-dollar, and the contribution limits for self-employed physicians are substantially higher than what W-2 employees can access through employer plans alone.

The Solo 401(k) is generally the superior vehicle for high-income locum physicians because it allows both an employee elective deferral and an employer profit-sharing contribution, producing a higher combined contribution limit than a SEP-IRA at most income levels. The SEP-IRA is simpler to administer but reaches its ceiling faster relative to the Solo 401(k)’s combined limit.

For physicians who have elected S-Corp status, retirement contributions are structured differently — the S-Corp makes the employer profit-sharing contribution on the physician’s behalf, and the employee elective deferral is made through the W-2 compensation structure. The mechanics change but the limits and tax benefits are largely preserved. See the LPG retirement accounts guide for the full framework.

5. Health Insurance Premiums

Self-employed locum physicians can generally deduct health insurance premiums as an above-the-line deduction on Form 1040 — not on Schedule C, but with the same effect of reducing adjusted gross income. The deduction can cover medical, dental, and vision premiums for the physician and often for a spouse and dependents as well.

The deduction is available as long as the physician is not eligible for employer-subsidized coverage through a spouse’s plan or another source. Eligibility for other coverage — even if you decline it — can reduce or eliminate the self-employed health insurance deduction. Confirm your eligibility status with a CPA.

S-Corp election changes the mechanics: the S-Corp must pay or reimburse health insurance premiums and include them in Box 1 W-2 wages for the physician-owner as a greater-than-2% shareholder. The physician then claims the self-employed health insurance deduction on Form 1040. The deduction is preserved under S-Corp status but requires correct payroll treatment at the entity level — a common area for errors in physician S-Corp returns.

6. Self-Employment Tax and the Deduction

The self-employment tax rate is 15.3% in 2026 — 12.4% for Social Security and 2.9% for Medicare. SE tax is calculated on 92.35% of net self-employment earnings, not gross revenue. The Social Security portion applies only up to the annual wage base; the Medicare portion has no cap. High-income locum physicians also owe the additional 0.9% Medicare surtax on earnings above $200,000 (single) or $250,000 (joint) — this is separate from the standard SE tax calculation.

The partial deduction: you can deduct one-half of the self-employment tax paid as an above-the-line deduction on Form 1040. This does not eliminate the SE tax burden, but it reduces the taxable income on which federal income tax is calculated. At a 37% marginal rate, the deduction for half of SE tax produces meaningful savings — confirm the calculation with your CPA for your specific income level.

S-Corp election is the primary mechanism for reducing SE tax exposure for high-income locum physicians. By paying a reasonable W-2 salary and taking remaining net income as a K-1 distribution, the distribution portion avoids SE tax entirely. At $300,000 or more in net locum income, the SE tax savings from S-Corp election typically exceed the administrative costs of operating the entity. See the LPG S-Corp guide for the full break-even analysis.

7. The QBI Deduction

The qualified business income deduction allows eligible self-employed physicians to deduct a percentage of their qualified business income from taxable income. The One Big Beautiful Bill Act (OBBBA), enacted in 2025, made the QBI deduction permanent and increased the deduction rate from 20% to 23% for tax years beginning after December 31, 2025 — making 2026 the first year the higher rate applies.

For 2026, the income thresholds below which the full deduction is available have been adjusted upward — approximately $201,775 for single filers and $403,500 for joint filers. Above those thresholds, phase-out rules apply and the deduction calculation becomes more complex.

Physician income from locum tenens practice generally qualifies as QBI for purposes of the deduction, though the specific treatment depends on how the income is earned and structured. S-Corp election affects how QBI is calculated — the W-2 wage component and the K-1 distribution are treated differently in the QBI formula.

8. Section 179 and Bonus Depreciation

For locum physicians who purchase qualifying business assets — medical equipment, computers, certain vehicles, office furniture — Section 179 and bonus depreciation allow immediate expensing rather than multi-year depreciation schedules.

The 2026 Section 179 limit is $2.56 million, with phase-out beginning at $4.09 million of qualifying property placed in service during the year. For most locum physicians whose capital purchases are limited to technology and office equipment, the Section 179 limit is not a binding constraint — any qualifying purchase can be fully expensed in the year of purchase.

Bonus depreciation is restored to 100% for qualifying property under the One Big Beautiful Bill Act, reversing the phase-down that had been scheduled under prior law. This means qualifying business asset purchases in 2026 can be fully expensed in the year of purchase. For most locum physicians whose capital purchases are limited to technology and office equipment, this combines with Section 179 to produce the same practical result — immediate full expensing. Verify current bonus depreciation treatment with a CPA before making purchasing decisions based on depreciation, as legislative history in this area has been subject to change.

9. What to Bring to Your CPA

The deductions above are the framework — but capturing them correctly requires documentation. A locum physician going into a tax preparation or planning meeting should have the following organized:

All 1099-NEC forms from agencies. A mileage log covering business miles driven during the year. Receipts or statements for malpractice premiums, licensing fees, CME, professional dues, and subscriptions. Health insurance premium documentation. Retirement contribution records. Records of any business asset purchases. A list of states where you worked during the year and approximate income earned in each — this drives the multi-state filing analysis. See the LPG multi-state tax filing guide for what multi-state filing means for your return.

The difference between a CPA who understands physician taxation and one who does not is material at locum income levels. A generalist CPA may miss the Solo 401(k) contribution opportunity, mishandle the S-Corp health insurance deduction, or fail to optimize the QBI calculation. Seek out a CPA with specific experience in 1099 physician or healthcare professional returns.