How 1099 taxes work for physicians
As a 1099 physician — whether working locum tenens, telehealth, consulting, expert witness, or moonlighting — you pay both halves of Social Security and Medicare tax yourself. W-2 physicians split this 7.65%/7.65% with their employer. As a 1099 contractor, the full 15.3% Self-Employment tax lands on you. On $200,000 in net income, that difference versus a W-2 physician is approximately $15,300 per year in additional tax — before federal income tax is calculated.
| Income Type | Social Security Tax | Medicare Tax | Total FICA |
|---|---|---|---|
| W-2 physician (your share) | 6.2% up to $184,500 | 1.45% all income | 7.65% |
| 1099 physician (your share) | 12.4% up to $184,500 | 2.9% all income | 15.3% |
| Additional Medicare (>$200k) | — | +0.9% | on amount above $200k |
Above $200,000 in net income, the IRS adds a 0.9% Additional Medicare Tax. Unlike the standard SE tax, this surtax applies only to the employee portion and is not split — you pay it in full with no offsetting deduction.
What a 1099 physician actually owes in 2026
| Net 1099 Income | SE Tax | Federal Income Tax (est.) | Total Tax | Effective Rate |
|---|---|---|---|---|
| $150,000 | $19,453 | $28,711 | $48,164 | ~32% |
| $200,000 | $23,948 | $42,711 | $66,659 | ~33% |
| $250,000 | $26,138 | $62,711 | $88,849 | ~36% |
| $300,000 | $28,328 | $82,711 | $111,039 | ~37% |
| $400,000 | $32,708 | $122,711 | $155,419 | ~39% |
Estimates assume single filer, federal standard deduction $16,100, no additional business deductions. SE tax calculated with SS cap at $184,500 and 0.9% Additional Medicare Tax above $200,000. Use the calculator above for your exact figures.
Top tax deductions for 1099 physicians
- Malpractice insurance — professional liability (malpractice) premiums are 100% deductible as a business expense. Individual physician malpractice premiums typically run $5,000–$50,000+ per year depending on specialty, making this one of the largest single deductions available. High-risk specialties (OB/GYN, neurosurgery, orthopedics) often see the highest premiums and therefore the largest deductions.
- Continuing Medical Education (CME) — CME course fees, conference registration, travel to CME events, and associated lodging are fully deductible for 1099 physicians. If you have both W-2 and 1099 income, CME connected to your 1099 specialty deducts against 1099 income. Annual CME costs typically run $2,000–$10,000.
- Medical license and board certification fees — state medical license renewal fees, DEA registration ($888 for 3 years), board certification and recertification fees, and hospital credentialing fees are fully deductible business expenses.
- Professional association dues — AMA, specialty society memberships (ACS, ACC, AAP, etc.), and state medical society dues are deductible.
- Home office deduction — physicians who perform charting, telehealth visits, medical consulting, or administrative work from a dedicated home office qualify. Deduct using the simplified method ($5/sq ft up to 300 sq ft, maximum $1,500/year) or the actual expense method based on real housing costs. For physicians in high-cost metros, the actual method frequently yields $5,000–$15,000+ in annual deductions.
- Health insurance premiums — often 100% deductible for self-employed physicians not eligible for employer-sponsored coverage. At $400–$1,200+/month for individual coverage, this deduction runs $4,800–$14,400/year.
- Self-employment tax deduction — half of your SE tax bill is automatically deductible from federal adjusted gross income. At $200,000 net income, that is approximately $11,974 deducted, saving roughly $4,430 in federal income tax at the 37% bracket.
- Locum tenens travel expenses — if you travel to temporary assignments (expected to last less than one year), travel, lodging, and 50% of meal costs are deductible. Many locums agencies reimburse these costs — only unreimbursed expenses are deductible.
- Medical equipment and supplies — stethoscopes, diagnostic equipment, scrubs (if specialty-specific and not worn outside work), and any equipment purchased for patient care in a private practice or independent contractor setting is deductible. Section 179 allows full expensing in the year of purchase.
Retirement contributions: the biggest lever for physician tax reduction
For high-income 1099 physicians, retirement contributions are the highest single-year leverage deduction available. Two accounts dominate:
Solo 401k — as a self-employed physician with no full-time employees, you can contribute as both employee and employer. In 2026, the total Solo 401k contribution limit is $72,000 (under age 50), $80,000 (age 50–59 and 64+), or $83,250 (age 60–63 under the SECURE 2.0 super catch-up). The employee deferral portion is $24,500 in 2026. At a 37% federal marginal rate, a $72,000 contribution saves approximately $26,640 in federal income tax alone — before state tax savings.
SEP-IRA — simpler to set up, allows contributions up to 25% of net self-employment income. At $300,000 net income, that is up to $75,000 in deductible contributions. SEP-IRA and Solo 401k cannot be combined above the $72,000 total limit — physicians at high income levels generally find the Solo 401k more flexible because it allows larger employee deferrals at lower income levels.
| Account | 2026 Limit (under 50) | 2026 Limit (50+) | Best For |
|---|---|---|---|
| Solo 401k | $72,000 total | $80,000 | Most 1099 physicians |
| SEP-IRA | 25% of net SE income | Same | Simplicity, high income |
| Defined Benefit Plan | Actuarially determined | Up to $280,000+ | Very high earners 50+ |
For physicians earning $400,000+ with a short remaining career window, a Defined Benefit Plan can shelter $150,000–$280,000+ annually — far exceeding what a Solo 401k allows. This requires actuarial setup and is worth discussing with a physician-specialized CPA.
When should a physician form an LLC or S-Corp?
The standard S-Corp election threshold for most freelancers is $60,000–$70,000 in net profit. For physicians, the threshold is higher — typically $150,000 in net profit — because medical professional entity requirements (PLLC in most states) and physician-specific payroll complexity add administrative costs of $3,000–$6,000/year rather than the $1,500–$2,500 typical for other freelancers.
Above $150,000 net profit, an LLC taxed as an S-Corp typically saves physicians $8,000–$20,000 annually by splitting income between a reasonable salary (subject to 15.3% SE tax) and distributions (exempt from SE tax). At $300,000 net income with a $180,000 reasonable salary, you pay SE tax only on $180,000 instead of $300,000 — saving approximately $11,475 in SE tax per year after accounting for the tax deductibility of half the SE tax.
Important note: most states require physicians to form a PLLC (Professional Limited Liability Company) or PC (Professional Corporation) rather than a standard LLC. The rules vary by state and specialty. Consult a physician-specialized CPA before forming any entity.
Use the LLC tax savings calculator to model your specific S-Corp savings.