How the comparison works
The W-2 side subtracts the employee share of Social Security (6.2% up to $184,500) and Medicare (1.45%, plus 0.9% Additional Medicare above $200,000, or $250,000 married filing jointly), pre-tax 401(k) and health premiums, and 2026 federal income tax after the standard deduction. The employer match and the benefits value you enter are added back as total value.
The locum side starts with your rate × hours (or shifts) × weeks, subtracts the business expenses you pay, then self-employment tax: 15.3% on 92.35% of net earnings up to the Social Security wage base, plus 0.9% Additional Medicare. Half of the self-employment tax, your health premiums and your retirement contributions are deducted before federal income tax, the way they are on a Form 1040.
The break-even rate is the locum hourly or daily rate at which the 1099 total value equals the W-2 total value for the hours and expenses you entered.
Example
A single physician compares a $300,000 W-2 job (50 hours a week, 46 weeks, $24,500 401(k), $10,000 match, $15,000 of other benefits, $3,000 of premiums) with locums at $200 an hour, 40 hours a week for 40 weeks. The W-2 job is worth about $246,800 a year including retirement and benefits, or about $107 per hour worked. The locum schedule grosses $320,000. After $7,500 of expenses, $32,000 of self-employment tax, health insurance and federal income tax, it is worth about $217,600 including $30,000 of retirement contributions, or about $136 per hour worked. The W-2 job comes out about $29,200 ahead in total. Matching it on 1,600 locum hours needs a break-even rate of about $229 an hour, while working 700 fewer hours a year. Change the inputs to match your offers.
What to check before signing a locum contract
- Malpractice and tail: confirm the agency's policy covers you, including tail coverage after the assignment.
- Travel and housing: who books and pays, and whether reimbursements are capped.
- Licensing: who pays for new state licenses, DEA registration and credentialing.
- Guaranteed hours: cancellation terms and minimum shifts per week.
- Quarterly estimated taxes: 1099 income has no withholding. Plan Form 1040-ES payments in April, June, September and January.
Comparing contractor and employee income in general? Use the W-2 vs 1099 calculator or the 1099 tax calculator.
Locum tenens tax questions
Are locum tenens physicians paid as 1099 contractors?
Most locum tenens physicians are paid as independent contractors on a 1099 through a staffing agency or directly by a facility. Some agencies offer W-2 locum arrangements. Classification depends on the working relationship, not on which result looks better.
Why does the locum rate need to be higher than the W-2 hourly equivalent?
As a 1099 contractor you pay both halves of Social Security and Medicare (15.3% on 92.35% of net earnings, up to the Social Security wage base), buy your own health insurance and retirement plan, and usually get no paid time off. The break-even rate in the results accounts for those costs.
Who pays malpractice insurance for locums?
Agencies usually provide claims-made malpractice coverage with tail for their locum providers. If you contract directly with a facility, malpractice and tail coverage must be negotiated in the contract. Enter any cost you pay yourself in the malpractice field.
Can a locum physician deduct travel and licensing?
Ordinary and necessary business expenses you pay yourself, such as state licenses, DEA registration, credentialing fees, CME and unreimbursed travel, generally reduce net self-employment income. Travel and housing reimbursed by the agency are not your expense.
What retirement plan can a 1099 locum use?
A solo 401(k) or SEP IRA. For 2026 the total defined-contribution limit is $72,000. A solo 401(k) allows up to $24,500 of employee deferrals plus an employer contribution based on net self-employment earnings.
Does this include the QBI deduction or state tax?
No. Medicine is a specified service trade or business, so the qualified business income deduction phases out at higher incomes, and state income tax varies. Leaving both out keeps the comparison conservative; review your situation with a tax professional.
Sources
- IRS: Self-Employment Tax (Social Security and Medicare Taxes)
- IRS: Independent Contractor (Self-Employed) or Employee?
- IRS: 2026 tax inflation adjustments
- IRS: One-participant 401(k) plans
Tax year 2026. Figures reviewed November 9, 2026.