One of the underappreciated advantages of 1099 independent contractor status is access to a deduction category that simply doesn't exist for employed physicians. Where a W-2 employee's after-tax income begins at their gross pay minus withholding, a self-employed physician's taxable income begins after legitimate business expenses are subtracted.
That distinction matters more at $300,000 or $400,000 than it does at lower income levels — because each deducted dollar is saving tax at your marginal rate. For a physician in a combined federal and state bracket of 40% or more, a $10,000 deduction is worth $4,000 in reduced tax liability.
The deductions available to a locum physician are not aggressive strategies. They are ordinary business expenses that the tax code explicitly contemplates for self-employed professionals. What determines how much of them you capture is documentation, structure, and whether you have an advisor tracking them throughout the year — not just at filing time.
Practice Expenses
The cost of maintaining your license to practice is a legitimate business expense for a self-employed physician. State medical license fees, DEA registration, and the cost of license renewals across multiple states are all deductible. For a locum physician maintaining licensure in several states simultaneously, this adds up.
Malpractice insurance premiums paid by a self-employed physician — not through an employer — are deductible. Tail coverage, which protects against claims made after a claims-made policy period ends, is also deductible in the year it's paid.
Professional association memberships — specialty boards, medical society dues, and similar — qualify as business expenses. Subscriptions to medical references, clinical decision tools, and professional journals used in practice are deductible.
Education and Professional Development
Continuing medical education required to maintain board certification or licensure is deductible when it maintains or improves skills required in your current practice. This includes registration fees, associated travel, and accommodations when the primary purpose is professional education.
The distinction that matters is whether the education qualifies you for a new profession or maintains competence in your current one. CME that sustains your ability to practice as a physician qualifies. A degree program that would retrain you for a different career does not.
Home Office
A physician who uses a dedicated space in their home exclusively and regularly for business purposes — scheduling, billing, record review, continuing education — may qualify for a home office deduction. The space must be used only for business, not as a dual-purpose room.
The deduction is calculated either as a percentage of home expenses proportional to the office square footage, or using the IRS simplified method. For a physician paying significant rent or carrying a mortgage in a high-cost area, this deduction is worth calculating carefully.
Health Insurance Premiums
A self-employed physician who is not eligible for coverage through a spouse's employer plan can deduct 100% of health insurance premiums — for themselves, their spouse, and their dependents — directly from gross income. This is not an itemized deduction; it reduces adjusted gross income, which affects your overall tax calculation more favorably.
For a locum physician sourcing their own health coverage, this deduction often represents $15,000 to $25,000 annually depending on the plan selected and family size.
Retirement Contributions
Pre-tax contributions to a Solo 401(k) or SEP-IRA reduce your taxable income dollar-for-dollar. The contribution limits available to a self-employed physician significantly exceed those available through a typical employer plan.
A physician operating through an S-Corporation can contribute both as an employee (up to the annual elective deferral limit) and as an employer (up to 25% of W-2 wages paid by the S-Corp). The combination routinely allows total annual contributions well above what any hospital-sponsored plan permits.
The tax benefit of maximizing these contributions compounds in two directions: the immediate reduction in taxable income, and the tax-deferred growth on the invested amount over the years until distribution.
What Gets Missed
The deductions physicians most commonly fail to capture aren't obscure. They're the ones that require tracking throughout the year rather than reconstruction from memory at tax time.
Business-related vehicle mileage — driving to and from temporary assignment locations, not from home to a regular workplace — is deductible at the standard IRS mileage rate. A locum physician who drives to multiple assignment sites and doesn't track mileage is leaving a legitimate deduction uncaptured.
Business-related phone and internet use, equipment purchased for professional use, and software subscriptions used in practice all qualify when documented. They disappear when there's no system for capturing them as they occur.
The difference between a physician who captures their full deduction picture and one who reconstructs it from bank statements in March isn't income. It's whether they have a system — and someone helping them maintain it — throughout the year.