How do taxes and retirement accounts work for a locums hospitalist?

You become the payroll department. As a locums hospitalist you are paid gross, with nothing withheld, and you owe income tax plus self employment tax on the net: 12.4 percent for Social Security up to the 2026 wage base of $184,500, and 2.9 percent for Medicare on everything, with an additional 0.9 percent Medicare tax above the income thresholds. On $300,000 of net contract income that self employment tax bill alone runs about $30,900, or about $31,200 with the additional Medicare tax counted. The retirement side is the compensation: a solo 401(k) lets you defer $24,500 for 2026 and add employer contributions up to the $72,000 overall ceiling, room few employed plans fill. The physicians who make locums work treat both sides as systems with dates attached, not as April surprises.

Part of the internal medicine hub.

The tax machinery: estimates, safe harbors, and the separate account

Self employment tax runs on 92.35 percent of your net earnings, so $300,000 of net contract income becomes about $277,050 subject to the tax. The Social Security part is capped: 12.4 percent of the first $184,500 is $22,878. The Medicare part is 2.9 percent of the full amount, about $8,034, and the additional Medicare tax adds 0.9 percent above $250,000 of joint income, a few hundred dollars more at this level. Total, about $30,900 of self employment tax, about $31,200 counting the additional Medicare tax, and half of the self employment tax is deductible against your income tax. None of it is withheld. It is collected through quarterly estimated payments, due in April, June, September, and January, and underpaying them draws penalties even when the April bill is paid in full.

The discipline that makes this painless is structural, not heroic. Every locums deposit lands in a business account. A fixed share, set with your tax pro at the start of the year, moves to a separate tax account the day it arrives. The quarterly estimate is paid from that account, never from spending money. The safe harbor rules protect you from penalties if your estimates reach the required percentage of last year's tax or this year's actual tax; your tax pro sets the number each January, and the separate account makes hitting it automatic. The physicians who get hurt here are never the ones with a tax problem. They are the ones who spent the float.

The retirement stack on the contractor side

The solo 401(k) is the centerpiece, and its math at hospitalist income is generous. You wear both hats. As the employee you defer $24,500 for 2026. As the employer you add a nonelective contribution that, for a sole proprietor, works out to 20 percent of net self employment earnings after the deduction for half the self employment tax. On $300,000 of net income that employer side reaches about $56,900 before the ceiling, and the overall limit on annual additions for 2026 is $72,000, so the plan fills to $72,000 in total. The hospitalist W2 versus 1099 guide works this computation line by line at a $390,000 contract.

Choose the solo 401(k) over a SEP IRA. The SEP takes employer contributions only, at the same effective rate, with no deferral on top, and a SEP balance counts against you in the pro rata calculation that taxes a backdoor Roth conversion. The solo 401(k) does not enter that formula, so the backdoor Roth IRA, $7,500 for 2026, stays clean beside it. In the waterfall the backdoor Roth sits early, before debt above 7 percent is attacked, because the space is annual and unrecoverable. Two overlap warnings. The $24,500 deferral is per person across all plans: moonlighting locums income beside a W2 job with a 403(b) shares one deferral, not two. And a 403(b) is aggregated with a retirement plan of a business you own for the overall additions limit, so a hospitalist employed at a hospital and contracting on the side needs those limits run together.

What locums income changes around the edges

Three edges catch locums physicians out. The finished emergency fund in the waterfall is set by employment type, and for 1099 and sporadic income it runs up to twelve months of expenses, not the six months a W2 employee targets; locums gaps are the reason the number exists. Disability coverage is entirely yours, and it has to be bought as an individual policy with own occupation language, because no group plan follows you between agencies; the own occupation question in this bank works the definitions. And the entity question is a legal question before a tax question: most states require a professional corporation, a professional limited liability company, or a professional association for medical practice, and California bars limited liability companies from professional medical services entirely, so form the structure your state's professional practice law requires, with the S corporation understood as a tax election on top of an eligible entity, never as the entity itself.