Guides · Taxes

Deductible Business Expenses on a Locum Assignment

Published 5 August 202613 min read

Business expenses are the only lever that reduces income tax and self-employment tax at the same time. Retirement contributions, the health insurance deduction and the section 199A deduction all sit on Form 1040, below net profit, and save income tax alone. A Schedule C deduction moves the number that both taxes are computed from.

That makes a deduction worth your marginal income tax rate plus your marginal self-employment rate — around 47 cents on the dollar early in the year while you are still under the Social Security wage base, and around 38 cents once you are past it. It also makes sloppy record-keeping expensive in a way it is not for an employee.

The test

IRC § 162(a) allows a deduction for all "ordinary and necessary" expenses paid or incurred in carrying on a trade or business. Ordinary means common and accepted in your line of work; necessary means helpful and appropriate. Neither means unavoidable, and neither means cheap.

Two things convert a plausible expense into a deductible one: it must be genuinely business-related, and you must be able to show it was. The second half is where locums lose money, in both directions — people who deduct nothing because they never tracked anything, and people who deduct everything and cannot support half of it.

The rule that governs travel: your tax home

Travel, lodging and meals away from home are deductible only while you are away from your tax home on a temporary assignment. Both words are technical.

IRS Publication 463 defines your tax home as your regular place of business or post of duty — not your family home. Where there is no single regular workplace, the three-factor test from Revenue Ruling 73-529 applies to the home you claim: do you perform part of your business in that area and lodge there when you do; do you have duplicated living costs there because work takes you away; and have you kept real ties to it. Satisfy all three and it is your tax home. Satisfy one and you are an itinerant worker whose tax home travels with you — and nothing about travel, lodging or meals is deductible, anywhere.

Temporary has a hard edge. Revenue Ruling 93-86 and the flush language of § 162(a) treat employment realistically expected to last more than one year as indefinite. If you expect an assignment to run under a year and it does, travel is deductible. If you expect it to exceed a year, it is indefinite from the outset even if it ends early. If your expectation changes partway through, deductions stop at the moment it changes. Rolling extensions at the same facility are where locums cross this line without noticing.

What deducts, in practice

Travel and transport

Flights, rental cars, rideshares, parking, tolls and baggage fees between your tax home and a temporary assignment are fully deductible. Personal-car mileage may be claimed at the standard mileage rate the IRS publishes each year, or as actual costs apportioned by business use — pick one method for a vehicle in its first year and understand you are largely locked in. Commuting between your lodging at the assignment and the facility is ordinary commuting and is not deductible; getting this wrong is common.

Lodging

Fully deductible at actual cost while away from your tax home on a temporary assignment. There is no per diem shortcut for lodging for a self-employed person — the federal lodging rate is available to employers reimbursing employees, not to you deducting your own costs. Keep the folios.

Meals — deductible at 50%

IRC § 274(n) halves the deduction for business meals, including meals while away from home. You pay 100% and deduct 50%.

You do have a substantiation shortcut here. Revenue Procedure 2019-48 lets a self-employed person use the federal meals-and-incidental-expenses per diem rate instead of keeping every receipt — $68 a day at the standard CONUS rate for federal fiscal year 2026, higher in designated high-cost localities, and reduced to 75% on the first and last day of travel. The 50% limit still applies on top. This is a record-keeping convenience, not a bigger deduction, and it is usually the right choice.

Professional costs

• State medical, nursing or PA licences — including the multiple licences locum work requires.
• DEA registration and state controlled-substance registrations.
• Board certification and recertification fees.
• Professional association dues (AMA, AANA, AAPA, AANP, specialty societies).
• CME courses, conference registration, and the travel and lodging to attend them.
• Medical journals, subscriptions, UpToDate and similar reference tools.
• Malpractice premiums you pay yourself, including tail coverage — see malpractice and tail cover.
• Credentialing services, background checks, drug screens and fingerprinting where you pay for them.

One caveat on licensing: the cost of qualifying for a new profession is not deductible, and neither is education that qualifies you for one. Maintaining and improving skills in your existing profession is. For a practising clinician this is rarely a live issue, but it is why a physician's MBA is usually contested and their CME is not.

Business operations

• Accounting and tax preparation attributable to the business (the Schedule C portion of your return).
• Legal fees for contract review — genuinely deductible, and worth spending.
• Bookkeeping software and a business bank account's fees.
• Business phone line, or the business-use percentage of a shared one.
• Laptop, tablet, loupes, stethoscope, scrubs that are not suitable for ordinary wear, and other equipment.
• Business insurance beyond malpractice.
• Agency or marketing costs you pay directly.

Home office

A locum who does charting, credentialing, scheduling and business administration from a dedicated space at home can claim it under IRC § 280A(c) — provided the space is used regularly and exclusively for the business and is your principal place of business for administrative and management activities. "Exclusively" is taken literally: a desk in a spare room qualifies, the kitchen table does not.

The simplified method gives $5 per square foot up to 300 square feet, capped at $1,500 — small, safe and requiring almost no records. The actual-expense method apportions rent or mortgage interest, utilities, insurance and repairs by floor area, and is usually worth more if you have a genuine dedicated room.

What does not deduct

• Commuting from your assignment lodging to the facility.
• Own-occupation disability premiums. A personal expense — and you want it that way, because after-tax premiums buy tax-free benefits. See the benefits gap.
• Health insurance on Schedule C. It is deductible, but above the line on Form 1040 — so it reduces income tax and not self-employment tax. Putting it on Schedule C is a real and common error.
• Everyday clothing, including business clothes worn to work. Scrubs and clearly identifiable uniforms are fine; a suit is not.
• Entertainment. Repealed entirely by the 2017 Act. A meal with a colleague may qualify at 50%; the tickets to whatever you attended afterwards do not.
• Travel with no genuine business purpose, or the personal portion of a mixed trip.
• Your family's travel to visit you on assignment.
• Anything you cannot substantiate. Under § 274(d), travel, meals and listed property require records of amount, time, place and business purpose. For these categories a court cannot estimate a reasonable figure in your favour the way it can for ordinary expenses — no records means no deduction.

What to keep, and for how long

Keep it as you go; nobody reconstructs a year of assignments in April accurately.

• A separate business bank account and card. This single step does more for your defensibility than any app.
• Every contract, showing dates, location and duration — the evidence that each assignment was temporary.
• Receipts for lodging, travel and anything over $75; a contemporaneous log of date, place, amount and business purpose for meals if you are not using the per diem.
• Proof that you kept and paid for your tax-home residence throughout — lease or mortgage statements and the payments themselves.
• A mileage log if you claim vehicle costs. Contemporaneous, not reconstructed.

The general assessment period is three years from filing, six if income is substantially understated, so keep records at least seven years. Records supporting the cost of equipment you depreciate must survive until several years after you dispose of it.

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