Telehealth, locums, staffing agencies and many outpatient groups hire clinicians as independent contractors. The pay usually looks higher than a comparable employee job. Sometimes it is. Often, once taxes, benefits and costs are counted, it isn't. Here's how the two arrangements really differ.
The tax difference
As a W-2 employee, your employer withholds taxes and pays half of your Social Security and Medicare (7.65% of wages). You pay the other 7.65%.
As a 1099 contractor, nothing is withheld, and you pay both halves — 15.3% self-employment tax on most of your profit, up to the Social Security wage base ($184,500 in 2026), then 2.9% above it. You can deduct half of that tax, and you may qualify for the 20% qualified business income (QBI) deduction. For healthcare work, the QBI deduction phases out at higher incomes: between $211,300 and $261,300 of taxable income for single filers in 2026.
You'll also make quarterly estimated tax payments instead of having tax withheld.
The benefits you give up
Employer benefits are easy to overlook because you don't see them on your paycheck. They often include:
- health, dental and vision insurance,
- retirement contributions or a match,
- disability and life insurance,
- malpractice and tail coverage,
- CME money and paid CME days,
- paid vacation and sick time.
Together, these are commonly worth 20% to 30% of salary. A 1099 job has to pay enough to replace them.
What you gain
Flexibility. Contractors often choose schedules, assignments and locations.
Deductions. Business expenses — licenses, CME, equipment, a home office used for telehealth, mileage between sites — reduce taxable income.
Bigger retirement accounts. A solo 401(k) lets you contribute as both employee and employer, which can shelter far more than many employer plans.
How much more should a 1099 job pay?
There's no single answer, but a useful approach is to find your breakeven — the 1099 rate that leaves you exactly as well off as the W-2 job. The W-2 vs 1099 calculator does this for you. In many cases, the breakeven is 20% to 35% above the W-2 salary.
Questions to ask about any 1099 offer
- Who pays for malpractice, and does it include tail coverage?
- How many hours or shifts are guaranteed?
- How and when are you paid, and are there fees?
- Who covers travel, housing and licensing in other states?
- What happens if the contract ends early?
- Are there non-compete or non-solicitation terms?
For Nurse & Allied health
Travel and per-diem nurses and therapists are often W-2 through an agency, with part of pay as tax-free stipends for housing and meals. That's different from true 1099 work. Make sure the stipend rules — including having a tax home — fit your situation.
For Physician & NP / PA
Locums and telehealth are the most common 1099 roles for physicians, NPs and PAs. Compare full-time locums with your current job using the locums vs employed calculator.
Side income is different
If you have a W-2 job and pick up 1099 shifts on the side, the question isn't "which job?" but "what do I keep from the extra work?" The moonlighting calculator answers that, and the quarterly estimated tax calculator helps you avoid penalties.
A quick example
Imagine an NP choosing between a $140,000 W-2 job with about $22,000 in benefits and a $165,000 1099 role. After self-employment tax, buying health insurance, paying business costs and funding a solo 401(k), the 1099 role leaves about $13,500 a year less than the W-2 job — despite paying $25,000 more on paper. The 1099 job would need to pay about $186,000 to match.
Neither arrangement is better in general. A 1099 role can be a great fit if the rate is high enough, you value flexibility and you're comfortable with paperwork. A W-2 role offers stability and benefits that are easy to undervalue. Run the numbers on both before you decide.