Your Work Moves.
Your Tax Strategy Has to Keep Up.
Locum tenens can offer flexibility, higher compensation, and valuable business deductions. But temporary assignments, frequent travel, multiple states, and 1099 income create tax rules that look very different from those of a traditional employed physician.
Schedule an Introductory CallLocums Taxes Are About More Than Business Deductions
The biggest tax questions often come from where you live, where you work, how long you work there, and whether the IRS considers you temporarily away from your tax home.
Your Tax Home
Travel expenses generally depend on whether you are working temporarily away from an established tax home.
Your Assignment Length
An assignment expected to last more than one year can turn deductible travel into nondeductible personal living expenses.
Your States
Each new state can bring another income tax return, withholding requirement, business filing, payroll issue, or local tax.
Start With Your Tax Home
For tax purposes, your home is not necessarily where you own a house, receive mail, or where your family lives. The concept of a tax home is tied to where you conduct your business.
This matters because qualifying airfare, lodging, mileage, rental cars, and meals may be deductible when you are temporarily working away from your tax home.
Locum tenens physicians therefore need to think about assignment length before signing an extension—not after the year is over.
Read: The 12-Month Tax Trap →The 12-Month Rule Isn't Really a 12-Month Free Pass
If an assignment is realistically expected from the beginning to last more than one year, it may be considered indefinite from the beginning.
And if a shorter assignment is extended so that you now expect to remain there for more than one year, the tax treatment can change when that expectation changes—not necessarily on day 366.
Potential Locums Travel Deductions
- Airfare to a temporary assignment
- Mileage or rental-car expenses
- Hotels or temporary lodging
- 50% of qualifying business meals
- Parking and tolls
- Local transportation
Whether these expenses qualify depends on the facts surrounding the assignment and your tax home.
Travel Is One of the Biggest Opportunities—and Biggest Traps
A locums physician can spend thousands of dollars each year moving between hospitals, airports, hotels, and temporary housing.
But simply being away from your residence does not automatically make the trip deductible. The assignment must satisfy the business travel rules, and personal portions of a trip generally need to be separated from business expenses.
This becomes especially important when you extend a business trip for vacation, attend CME while traveling, or work internationally.
Learn more about temporary assignments →Your Home Office May Be Worth More Than the Home Office Deduction
Many locums physicians spend relatively little time working clinically from home, but still perform administrative work there: reviewing contracts, completing credentialing, scheduling assignments, handling bookkeeping, and managing the business.
If your home office qualifies as your principal place of business, it may affect whether driving from home to another work location is treated as deductible business mileage rather than commuting.
For a physician who regularly drives to temporary work locations, the mileage impact can be substantially more valuable than the home office deduction itself.
Read: Is That Drive Deductible? →Compare Home Office Deduction Methods →
Track the Miles While You Drive Them
A year-end estimate reconstructed from memory is weak documentation. Your mileage records should generally identify the date, destination, business purpose, and miles driven.
The same principle applies to travel, meals, and other expenses subject to stricter substantiation rules.
Every New State Can Add Another Layer of Tax
Your resident state generally taxes all of your income. At the same time, another state may tax income earned while you physically work there. Your resident state may provide a credit, but that does not make the filing requirements disappear.
Add an S corporation and the situation can become even more complicated: business registration, payroll withholding, nonresident returns, entity returns, local taxes, and pass-through entity tax elections may all come into play.
Explore Multi-State Tax ArticlesBuild the Rest of the Tax Strategy Around Your Locums Work
Travel deductions are only one piece. Your entity, retirement plan, estimated payments, and bookkeeping all need to work together.
Should You Elect S Corporation Status?
An S corporation can reduce employment taxes in the right situation, but payroll, state taxes, QBI, retirement contributions, compliance costs, and reasonable compensation all affect the math.
When an S Corp Isn't the Right Prescription →Use Your Retirement Plan Strategically
A Solo 401(k) can create significant retirement-plan space for an independent physician. Higher earners may also consider after-tax contributions or a cash balance plan.
After-Tax 401(k) Contributions →Cash Balance Plans →
Plan for Taxes Before April
Locums income often comes without withholding. Federal estimates, state estimates, retirement contributions, entity elections, and other planning decisions have deadlines throughout the year.
Your Tax Year Is Bigger Than Your Calendar Year →Keep Clean Business Records
Separate business accounts and organized bookkeeping make it much easier to identify deductible expenses, forecast income, calculate estimated taxes, and prepare accurate returns.
Explore 1099 Physician Tax Planning →Document Travel and Mileage
Travel, mileage, lodging, meals, and related expenses often require more documentation than a credit-card statement alone provides. Build the recordkeeping system before you need to defend it.
Learn About Vehicle Documentation →If You Have an S Corp, Reimburse Expenses Correctly
S corporation owners often need an accountable plan to reimburse personally paid home-office, mileage, phone, internet, and other legitimate business expenses.
Read About Accountable Plans →Common Locum Tenens Tax Mistakes
Most problems are not caused by missing an exotic loophole. They're caused by applying ordinary tax rules to an unusual work arrangement.
Assuming Every Trip Is Deductible
Maintaining a residence somewhere does not automatically establish a tax home or make expenses at your assignment location deductible.
Ignoring an Assignment Extension
An extension can change a temporary assignment into an indefinite one and alter the treatment of lodging, meals, and travel.
Forgetting State Filing Obligations
Working even a relatively short assignment in another state can generate another tax return or other compliance requirements.
Treating Commuting as Business Mileage
Driving to work is not automatically deductible because you are self-employed. The location, assignment, and home-office rules matter.
Electing S Corp Status on Autopilot
Payroll-tax savings are only one part of the calculation. Compliance costs and state tax consequences can erase the benefit.
Waiting Until Tax Season to Plan
By the time your return is being prepared, many opportunities involving payroll, estimated payments, contracts, and business structure have passed.
More Tax Resources for Locum Tenens Physicians
Dig deeper into the rules that most often affect physicians who travel for temporary work.
Tax Planning That Travels With You
TaxSmart MD helps locum tenens physicians coordinate federal taxes, multi-state filing, business deductions, retirement plans, S corporation strategy, and year-round tax planning.
Schedule an Introductory Call