Smart Financial Moves for Physicians Who Moonlight or Work Locum Tenens

Key Takeaways

• Plan for taxes: As an independent contractor, you’re responsible for setting aside money for income and self-employment taxes. Work with a financial professional and make quarterly payments to avoid penalties.
• Check your insurance: Confirm malpractice coverage and update your disability/life insurance to reflect your higher earnings.
• Save strategically: Use accounts like a Solo 401(k) or SEP IRA to put locum/moonlighting income to work for retirement savings and tax benefits.
• Treat extra income as bonus money: Avoid lifestyle creep by directing it toward debt repayment, retirement, or education savings.
• Stay organized: Keep track of contracts, tax forms, and licensing requirements, and review your main employment contract for non-compete clauses.

Many physicians consider moonlighting or taking on locum tenens assignments at some point in their career. For some, it’s about paying down student loans more quickly. For others, it’s an opportunity to experience a new hospital environment or gain flexibility. And sometimes, it’s simply about having a little more financial breathing room.

While the extra income is appealing, the financial side of this work isn’t always straightforward. Independent contracting comes with unique tax rules, insurance requirements, and retirement planning opportunities that aren’t part of most physicians’ full-time jobs. The good news is, with the right planning, you can turn moonlighting and locum work into a powerful financial tool rather than a source of stress.

Here are a few areas you’ll want to pay special attention to and some test scenarios to help you think through how to handle them.

1. Understanding the Tax Angle

When you’re moonlighting or working locums, you’re usually paid as an independent contractor rather than a W-2 employee. That small detail changes quite a bit about how your income is taxed.

Unlike your main job, where taxes are withheld from each paycheck, independent contractor income comes to you “raw”—no taxes taken out. This means it’s on you to set aside money for federal and state income taxes, as well as self-employment taxes (which cover both the employee and employer portions of Social Security and Medicare).

The upside? Independent contractor status also means you can deduct legitimate business expenses. Licensing fees, CME costs, travel to a locum site, medical liability insurance, even part of your home office if you use it for contract-related admin—all of these can reduce your taxable income.
Be sure to track expenses on equipment, licensing fees, and even scrubs, as they could be tax deductions. 

Consider: You’re an emergency medicine resident who is moonlighting at a nearby urgent care center. In your first year, you earned $40,000 in extra income, only to be shocked by a $12,000 tax bill you hadn’t planned for. After working with a financial advisor, you set up quarterly estimated tax payments and realize you can also deduct your CME expenses, licensing fees, and travel costs—saving you several thousand dollars and giving you peace of mind when tax season rolls around.

2. Insurance: Making Sure You’re Covered

Your hospital or practice may cover your malpractice insurance for your main role, but that doesn’t mean you’re automatically protected for moonlighting or locum work.

You’ll want to know:

• Who’s providing malpractice coverage for your extra shifts? Some locum agencies do, but not all.
• Is it occurrence-based or claims-made coverage? If it’s claims-made, you may be responsible for “tail” coverage when you leave.
• Do you have enough disability and life insurance? If your income has gone up because of side work, your old policies may not fully protect your current lifestyle or family needs. Additionally, make sure they’re the right policies for you—like having own occupation coverage in the event that you can’t work. 

Consider: Say you’re taking on weekend locum shifts at a rural hospital. Don’t assume malpractice is included in your contract only to find out later the coverage is claims-made and you’ll be on the hook for tail insurance if you leave. By clarifying the terms before signing and building the cost of tail coverage into your rate negotiations, you can avoid an expensive surprise down the road.

3. Turning Extra Work Into Extra Retirement Savings

One of the downsides of locum and moonlighting work is that you don’t get the usual benefits package—no employer-sponsored retirement plan, no 401(k) match, no automatic savings. But that doesn’t mean you’re out of options.

As an independent contractor, you can create your own retirement account. A SEP IRA or Solo 401(k) allows you to contribute far more than a traditional IRA, which can mean tens of thousands of dollars saved on your taxes and invested for your future. For physicians in high tax brackets, these accounts are an especially powerful way to make your side income work double duty.

Some physicians also use this income for Roth contributions. While you may be phased out of Roth eligibility at your income level, strategies like a “backdoor Roth IRA” can still provide you with valuable tax diversification—giving you both taxable and tax-free options in retirement.

I can’t stress enough to not let this extra income sit idle. Determine an order of operations for what to do with the next dollar of income. Whether it is paying down debt, contributing to the aforementioned retirement vehicles, or saving for your child’s education, make sure to have an intentional plan in place to use your extra dollars to their greatest effect.

Consider: Say you earn about $80,000 per year in locum work. Instead of letting that income sit in a checking account, consider opening a Solo 401(k). By contributing $30,000 annually, you could lower your tax bill and build up a retirement account that reaches $150,000 in just five years—and that’s in addition to your other retirement savings benefits like a hospital 403(b).

4. Managing Irregular and Unpredictable Income

Unlike a salaried job, moonlighting and locum tenens work often comes in waves. One month you might pick up several shifts and earn a significant amount. The next, your schedule could slow down.

This unpredictability can make financial planning tricky if you start relying on the extra money for ongoing expenses. A better approach is to treat this income as bonus money—a flexible resource that can accelerate your long-term goals.

Consider: You decide to put every dollar of your moonlighting income directly toward your student loans. Over four years, you pay off $120,000 in debt—nearly a decade earlier than planned. You didn’t build your lifestyle around the extra income, which makes your progress feel like a huge win instead of a burden.

5. Staying Organized and Compliant

Taking on multiple roles means more contracts, more paperwork, and more credentialing requirements. That can be overwhelming if you don’t have a system.

It’s smart to create a simple process for tracking:

• Your contracts and pay records.
• All 1099s and tax documents.
• Licensing, DEA registration, and hospital credentialing.

Another important step is reviewing your primary employment contract. Some physicians are surprised to find that their agreement includes non-compete clauses or restrictions on outside work. Getting clarity up front can help you avoid career headaches down the road.

Consider: Say you accept locum shifts two towns over, only to have your primary employer remind you of a non-compete clause that restricts you from practicing within 50 miles of your main hospital. Luckily, you kept everything documented and were able to work out an exception, avoiding a close call that could have cost you both income and reputation.

The Bottom Line

Moonlighting and locum tenens work can be incredibly rewarding—for your career, your financial goals, and even your sense of professional flexibility. But the benefits come with added responsibilities. By paying attention to taxes, insurance, retirement savings, budgeting, and organization, you can make sure your side work builds long-term financial security rather than adding complexity or risk.

If you’re considering picking up extra shifts or locum work, let’s talk. Curi Capital works with physicians every day to make sure their financial lives are aligned with their goals—so that extra effort today translates into the freedom and security you want tomorrow.

Frequently Asked Questions

▸ Do I really need to make quarterly tax payments on moonlighting or locum income?
Yes. Since no taxes are withheld from 1099 income, you’ll likely owe quarterly estimated taxes. Skipping them can lead to penalties and a large bill at tax time.

▸ What kind of expenses can I deduct as a physician working locum tenens or moonlighting?
Common deductible expenses include licensing fees, CME costs, malpractice premiums, travel to and from work sites, and sometimes a portion of home office expenses if you use it for administrative work.

▸ Who provides malpractice coverage when I moonlight or take locum assignments?
It depends. Some facilities or locum agencies include malpractice coverage, but not always. Confirm whether the coverage is occurrence-based or claims-made (and whether you’ll need tail coverage).

▸ Can I still contribute to retirement accounts if I’m earning through locum or moonlighting work?
Absolutely. Independent contractors can open a SEP IRA or Solo 401(k), which allow for much higher contributions than a traditional IRA. These accounts help you save on taxes while building wealth.

▸ How should I use my moonlighting income—pay down debt or invest it?
It depends on your goals and interest rates. Many physicians choose to use extra income for high-interest debt first, then shift to investing once their balance sheet is stronger. A financial advisor can help tailor a plan that balances both. See this recent article from my colleague, A Doctor’s Dilemma: Pay Off Student Loans Early or Invest?

▸ What if my employment contract has a non-compete clause?
Read your contract carefully before taking outside work. Some clauses may limit where or how you can work on the side. When in doubt, consult a legal or HR professional to avoid conflicts.