What Are The Tax Benefits of Being a Locum Tenens Provider?
If you’re thinking about becoming a locum tenens provider, you may have a lot of questions about how to get started and how to handle finances. Specifically, you might be wondering if there are any tax benefits to being a locum tenens provider. The good news is that, yes, there are tax benefits you can take advantage of since locum tenens providers work as independent contractors.
Deductions
As an independent contractor, you can reduce your taxable income by deducting certain business expenses. There are fewer restrictions on what you can deduct compared to being a full-time employee, although your expenses must be “ordinary” or “necessary” for your work to qualify as an allowable deduction. Any luxury items or expenses that do not pertain to your work won’t qualify. Any income and expenses that are related to your work as an independent contractor must be reported on IRS Form 1040 Schedule C.
You can also deduct expenses related to lodging, meals, or travel outside of the area where you live. This can include any mileage expenses incurred traveling between your home and job site, or to events related to your work, such as conferences. However, you cannot deduct these expenses if they were reimbursed by the locum tenens agency or through the facility at which you worked. You also cannot deduct these expenses if they were associated with your regular or full-time job.
You may be able to deduct your health insurance premiums, as long as you do not have employer-sponsored health insurance. This also does not apply if your spouse has access to employer-sponsored health insurance, or if your employer offers insurance but you choose to pay for your own plan.
Generally, you can deduct expenses related to education, licenses, or examinations related to your profession. According to H&R Block, you will have to be able to prove that any courses taken either maintain or improve skills necessary for your work, and that the course is required by law or regulation to keep your license to practice in your profession.
Retirement Accounts
As a locum tenens provider, you also have some flexibility with your retirement accounts, which can have some tax advantages. Contributing to your retirement account using pre-tax dollars is often the largest tax deduction for healthcare providers. Not only that, but if you contribute to your account during your peak earning years, you can withdraw money at lower tax rates when you do retire.
Additionally, as an independent contractor, you can choose from different retirement accounts. One account you might want to consider is an SEP-IRA. According to White Coat Investor, this type of account allows you to make contributions up until Tax Day, which means you have more time to fund it while still getting the deduction on your taxes.
How to Make Sure You Get Your Tax Benefits
The best way to make sure that you are getting all of the tax benefits available to you as an independent contractor is to keep good records. Make sure you keep receipts and paperwork for any expenses you incur for work so that you don’t have to guess what you spent during the year.
As a general rule of thumb, try to put aside 40% of what you earn for tax time and submit quarterly estimates to avoid having to write a large check at the end of the year. If you don’t feel comfortable tracking and working on your taxes yourself, be sure to consult a tax professional to make sure you get the best outcome.
