Locum Tenens and 1099 Physician Taxes in New Jersey: SE Tax, Deductions, and Quarterly Estimates for 2026

Short answer: A physician paid on a 1099 is a business in the eyes of the IRS. That means 15.3% self-employment tax, quarterly estimated payments, and zero withholding. It also unlocks deductions W-2 employees never get. This guide walks the 2026 numbers for NJ physicians doing locum tenens, moonlighting, or independent-contractor shifts. To see your own math, start with our free self-employment tax calculator.

Locum tenens pay looks bigger than hospital pay. Part of that is real. Part of it is tax you have not paid yet. The sections below cover where that tax comes from — and what legitimately shrinks it.

Figures are for tax year 2026, checked against IRS, Social Security Administration, and NJ Division of Taxation sources as of July 23, 2026.

How 1099 Physician Income Differs From W-2 Pay

Three things change the moment a hospital, staffing agency, or practice pays you on Form 1099-NEC:

• No withholding. Nothing comes out for federal, state, Social Security, or Medicare. You pay all of it yourself.
• Self-employment tax replaces FICA. An employee pays 7.65% and the employer matches it. On a 1099, both halves are yours.
• Schedule C deductions open up. Business expenses come off the top before income tax and SE tax are figured.

One caveat before the math. Some “1099” arrangements are not legal 1099s at all. New Jersey’s strict ABC test presumes employment, and it reaches physicians and associates. For the classification rules and the practice’s side, see our NJ 1099-vs-W-2 associate guide. This post assumes the 1099 status is genuine — common for true locum tenens work through staffing agencies.

The 2026 Self-Employment Tax Math

Self-employment tax runs 15.3% (IRS, Self-Employment Tax). It has two layers:

• Social Security: 12.4%, on net earnings up to the 2026 wage base of $184,500 (SSA, Contribution and Benefit Base).
• Medicare: 2.9%, with no cap. A 0.9% Additional Medicare Tax applies above $200,000 single or $250,000 joint (IRS).

Two adjustments soften it. Net earnings are figured at 92.35% of Schedule C profit. And half of the SE tax is deductible against income tax (IRS Schedule SE).

Moonlighters get one more break. W-2 Social Security wages count against the same $184,500 cap first. A hospitalist with a $220,000 W-2 salary has already cleared the cap. Her $60,000 of locum profit skips the 12.4% layer entirely. It pays only the Medicare layers — roughly 2.9% to 3.8%. Illustration only; your numbers depend on your facts, and results vary.

A full-time locum with no W-2 job gets no such break. The full 15.3% applies until net earnings pass $184,500. Run your own split through the self-employment tax calculator.

Deductions 1099 Physicians Commonly Track

Every dollar of legitimate business expense cuts both income tax and SE tax. Physicians in this situation often track:

• Licensure and credentialing — state medical licenses, DEA registration, hospital credentialing fees.
• Board and exam costs — certification and MOC fees, plus exam travel.
• CME — course fees, journals, subscriptions, and related travel.
• Malpractice insurance — premiums you pay yourself, including tail coverage.
• Travel between assignments — lodging, airfare, and mileage for temporary assignments away from your tax home, under the travel rules in IRS Publication 463. Business miles use the IRS standard rate, which rose to 76 cents per mile for July–December 2026.
• Home office — a space used regularly and exclusively for the admin side: scheduling, billing, records.
• Equipment and tools — medical equipment, phone, laptop, and software used for the work.
• Health insurance — self-employed physicians may deduct their own premiums, separately from Schedule C.
• Retirement contributions — see the Solo 401(k) vs SEP-IRA section below.

Two cautions apply. Travel deductions collapse when an assignment stops being temporary under the tax-home rules. Check that facts test before signing a long extension. And housing or stipends the agency already pays for are not yours to deduct.

One more upside: 1099 physician profit can qualify for the 20% QBI deduction. Medicine is an SSTB, so the deduction phases out at higher incomes. For 2026 the phase-out starts at $201,750 of taxable income for single filers and $403,500 for joint filers, per Rev. Proc. 2025-32.

Quarterly Estimated Taxes and the Safe Harbors

No one withholds for you, so the IRS and New Jersey collect quarterly. Federal estimates are generally required once you expect to owe $1,000 or more, per the Form 1040-ES instructions. New Jersey’s trigger is more than $400 of expected NJ tax.

The 2026 due dates are April 15, June 15, September 15, and January 15, 2027.

The safe harbors set the floor. You generally avoid federal underpayment penalties by paying at least:

• 90% of your current-year tax, or
• 100% of last year’s tax — 110% if your prior-year AGI was over $150,000.

New Jersey’s version uses 80% of current-year tax, or 100%/110% of the prior year at the same $150,000 line. For established physicians, the 110% prior-year number is the simplest anchor. A first-year locum with no 1099 baseline should project the current year instead.

The working system is simple. Set aside a fixed share of every locum deposit in a separate account. Then true the number up each quarter with our estimated tax calculator.

LLC vs S-Corp: When the Election Starts Paying

An LLC alone changes nothing on this page. A single-member LLC is a disregarded entity — same Schedule C, same 15.3%. What an LLC provides is legal separation, not tax savings.

The S-Corp election is the actual tax lever. It splits profit into a reasonable W-2 salary, which pays payroll tax, and distributions, which skip SE tax. The trade-offs are real:

• A payroll system and quarterly Form 941 filings.
• A separate federal return, Form 1120-S.
• The NJ CBT-100S and its minimum tax.
• A documented, defensible reasonable salary.

Because those fixed costs come first, the election has a break-even point. Below it, compliance costs eat the savings. Above it, the gap grows with profit. Model your own numbers with the S-Corp savings calculator. Then read how the salary line gets set in our reasonable-salary guide for NJ physicians.

Two NJ wrinkles matter. Licensed physicians typically practice through a PC or PLLC under state professional-entity rules, with the federal S election on top. And moonlighters whose W-2 salary already exceeds $184,500 should pause. The 12.4% layer was never going to hit their locum profit, so the election’s savings shrink. The full structure comparison is in S-Corp vs LLC for NJ businesses, and year-one mechanics are in the first-year S-Corp compliance checklist.

Multi-State Assignments: The NJ Resident’s Problem

Locum work travels. Your tax home does not. Three rules govern the result:

• New Jersey taxes residents on everything, wherever it was earned.
• Assignment states tax the income earned there, usually through a nonresident return.
• Schedule NJ-COJ gives a credit for taxes paid to other jurisdictions, limited to the NJ tax on that same income (NJ Division of Taxation).

The credit kills most of the double tax, but none of the paperwork. A NJ physician covering assignments in three states can easily file four returns. One Pennsylvania note: the NJ-PA reciprocal agreement covers employee wages only. W-2 locum arrangements through an agency behave differently there than 1099 ones.

Track it as you go — days worked, income, and any withholding, by state. The credit mechanics are covered in our NJ/NY two-state tax guide. ProAxis handles this allocation as part of physician tax planning.

Solo 401(k) vs SEP-IRA: The 2026 Numbers

Retirement contributions are the biggest deduction many 1099 physicians leave unclaimed. Both plans cap combined 2026 contributions at $72,000, per IRS Notice 2025-67. They get there differently:

• SEP-IRA: employer contributions only, up to 25% of compensation. Simple to open, nothing to defer.
• Solo 401(k): a $24,500 employee deferral, plus an $8,000 catch-up at 50 or older, plus the employer share.

The deferral is why the Solo 401(k) usually reaches a bigger contribution from the same locum profit. One trap for moonlighters: the employee deferral limit is shared across all your plans. A hospital 403(b) you already max out uses up the same $24,500. In that case the two plans land much closer, and the employer-share math decides it. Results vary by income, age, and plan mix.

How ProAxis Works With 1099 Physicians

ProAxis is a licensed NJ CPA firm based in Hasbrouck Heights, serving physicians across NJ, NY, and PA. For locum and moonlighting doctors, engagements typically cover:

• Schedule C preparation with a physician-specific deduction review.
• Quarterly safe-harbor calculations, federal and NJ.
• S-Corp break-even modeling and election timing.
• Multi-state nonresident returns and the NJ-COJ credit.
• Retirement-plan coordination with your salary and QBI picture.

The firm is 100% virtual — secure portal, e-signature, video meetings. If 1099 income is becoming your main event, schedule a free consultation. The broader practice-owner stack lives on the healthcare hub.

1099 Physician Tax FAQ

How much self-employment tax does a 1099 physician pay in 2026?

The self-employment tax rate is 15.3% on net self-employment earnings: 12.4% for Social Security plus 2.9% for Medicare. For 2026, the Social Security portion stops at the $184,500 wage base. Medicare has no cap, and a 0.9% Additional Medicare Tax applies above $200,000 for single filers ($250,000 joint). Net earnings are figured at 92.35% of Schedule C profit, and half of the SE tax is deductible. W-2 Social Security wages count against the same $184,500 cap first.

What can a locum tenens physician deduct on a 1099?

Physicians with 1099 income commonly track state license fees, DEA registration, board and exam costs, CME, malpractice and tail premiums, and professional dues. Travel and lodging between temporary assignments away from your tax home may qualify under the IRS travel rules in Publication 463. Self-employed health insurance premiums and retirement plan contributions are separate deductions. Keep receipts and a mileage log — records drive everything. Deductibility is fact-specific, and results vary.

Should a 1099 physician form an LLC or elect S-Corp status?

An LLC by itself does not change self-employment tax. A single-member LLC is taxed exactly like a sole proprietor. An S-Corp election can reduce SE tax by splitting profit into a reasonable W-2 salary and distributions. The election adds payroll filings, a separate Form 1120-S return, and the NJ CBT-100S minimum tax. So it pays off only above a break-even profit level. New Jersey physicians typically practice through a PC or PLLC under state professional-entity rules. Model both before electing; results vary.

How much should a 1099 physician set aside for quarterly taxes?

Enough to hit a safe harbor. Federally, you generally avoid penalties by paying 90% of current-year tax, or 100% of prior-year tax — 110% if prior-year AGI was over $150,000. New Jersey uses 80% of current-year tax, or 100%/110% of the prior year at the same $150,000 line. Payments are due April 15, June 15, September 15, and January 15. Many physicians set aside a fixed share of every 1099 deposit, then true it up each quarter.

How do multi-state locum assignments affect a NJ resident’s taxes?

New Jersey taxes residents on all income, wherever it was earned. Each assignment state can also tax the income earned there, usually through a nonresident return. Schedule NJ-COJ then gives a credit for taxes paid to other jurisdictions, limited to the NJ tax on that same income. The NJ-PA reciprocal agreement covers employee wages, not 1099 business income. Track days and income by state as you go.

Solo 401(k) or SEP-IRA for locum tenens income in 2026?

Both cap total 2026 contributions at $72,000, per IRS Notice 2025-67. A SEP-IRA takes employer contributions only, up to 25% of compensation. A Solo 401(k) adds a $24,500 employee deferral, plus an $8,000 catch-up at age 50 or older, on top of the employer share. That lets a Solo 401(k) reach a larger contribution at the same income. One catch for moonlighters: the employee deferral limit is shared with a hospital 403(b) or 401(k). Results vary by income, age, and plan mix.

This article is general information for New Jersey, New York, and Pennsylvania physicians with 1099 income. It is not tax advice and does not create a CPA-client relationship. Deductions and elections are fact-specific, examples are illustrations only, and results vary. Figures are for tax year 2026 as of July 23, 2026, sourced to the IRS, the Social Security Administration, and the NJ Division of Taxation. Confirm your specifics with a licensed CPA before you act.