Our physician communities often discuss the tax benefits of self-employed or 1099 income, as many are attracted to the number of tax deductions that they become eligible for which they are not eligible for with their W2 income as employed physicians . While we have a more comprehensive article on tax deductions for 1099 physicians, this article will focus specifically on the deductions that telemedicine physicians may be eligible to take depending on how they are earning money. Specifically, the deductions discussed in this article apply to telemedicine physicians that are self employed or who receive a 1099 tax form.
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Ways that you may get paid as a telemedicine physician
How you will get paid will depend on your method of employment. Some full and part time telemedicine companies will pay you as a W2 employee, in which case your taxes will remain very straightforward. Your tax situation will be very similar to when you were an employed physician or resident or fellow. Unfortunately in these situations, you will not be eligible for most of the tax deductions below, as those are geared towards self-employed physicians who are earning money through their own telemedicine business or as a 1099 independent contractor. Deductions which you may once have been eligible for as a W2 employee, such as the home office deduction, are not available to you as a W2 employee in the current tax code (as of January 2025). See our article on tax strategy for the W2 physician for deductions or tax strategy that you may be able to utilize in this situation.
Paying taxes on your 1099 or self employed telemedicine income
For those new to telemedicine who have only ever been paid as a W2 employee, the world of self employed or 1099 income can get confusing. We have a primer on self employed finances that you should explore which goes over things like tracking your income, paying quarterly taxes, budgeting, and record keeping. Unlike W2 income, where taxes are withheld from your paycheck, you will need to keep track of the taxes you owe.Â
What this means is if you are self-employed or receive a 1099:
You are solely responsible for paying the taxes on the income earned appropriately. You will pay taxes both on the employer and the employee side. The money you receive in payments from patients or from a telemedicine company will simply be in the gross amount that you are owed, and you will figure out the rest.
You will have access to more tax deductions (more below).
You will likely have to pay quarterly estimated taxes.
Read our primer on self-employed income as a physician for more information on self-employed finances.
Can I take every deduction that self employed physicians are eligible for?
While you will hear about lots of potential deductions, you should know that not all will apply to your particular situation, so it’s important to speak to an accountant well versed in the space.Â
Some principles to keep in mind:
Anything that is done on your behalf or reimbursed to you, whether it be licensing fees, equipment purchases, etc., is not tax deductible. Only expenses that you paid for out of your pocket and that you weren’t reimbursed for are eligible for deductions.Â
You cannot (or at least fully) deduct things that you also use for personal use. Those costs may have to be prorated according to the percentage they are used for your telemedicine business activity.
You cannot deduct things that would not be considered reasonable and customary for somebody engaging in a telemedicine business. For example, you likely cannot deduct a car for your business.
What deductions can I take as a self employed and/or 1099 telemedicine physician?
Here is a list of things commonly deducted by telemedicine physicians:
1. Professional and educational fees and expenses, including:
Licensing fees related to getting a new state license or renewing a license and related expenses, such as DEA registration, payments necessary to query NPDB, apply for FCVS or the Interstate Medical Licensure Compact, verification services, fingerprinting, mailing materials, and using a licensing company
Educational expenses for maintaining licensing and credentialing, such as board exams or related study materials or courses, maintenance of certification, medical society memberships, medical books, CME, journal subscriptions, medical reference subscriptions, and any fees related to CME or professional conference expenses
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2. Professional services you need to set up and run your business, including:
Attorney fees for setting up your entity or reviewing contract
Accounting services
Administrators for retirement accounts such as a solo401k or defined benefit cash balance plan
Website costs, if applicable, including website developer, SEO service, website hosting fees
Insurances related to your work, such as malpractice insurance or business insurance
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3. Supplies related to your telemedicine work, such as:
Clothing (that cannot be used for other purposes - note that a shirt and tie can not be deducted as it can be worn elsewhere, but scrubs can be)
Special software or equipment you need, such as:
Webcam: Logitech C920x HD Pro Webcam
Microphone: Blue Yeti USB Microphone
Ring light: NEEWER Ring Light Kit
Green screen: Elgato Collapsible Backdrop
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4. Home office and business related expenses necessary to run your telemedicine business (be careful to only take those that apply), including:
Home office deduction (as long as you exclusively use this space for functions related to your business, such as conducting telemedicine visits, scheduling shifts, doing accounting, etc) - read more about taking the home office deduction as a physician
Cell phone
Cell phone service
Laptop or desktop computer
Internet
Tax software
Printer or scanner and printer paper or ink
Shredder
Headphones or microphone
Postage or shipping fees
Business cards
Credit card fees
Virtual assistant fees
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5. Benefits, including insurance and retirement plans, if applicable:
Health insurance premiums (health, dental, vision)
HSA contributions
Retirement plan contributions to solo401k or SEP-IRA
Pension Plan contributions to defined benefit cash balance plan
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Do I need an LLC to take these deductions for my work as a telemedicine physician?
The deductions above can be taken regardless of whether you have an LLC, S-corporation, or are filing as a sole proprietor. The benefit to having an LLC or S-corp from a tax savings perspective is related to other things such as saving on payroll taxes or being able to claim other deductions that you may not be eligible for if they were to flow through directly on your tax return. You can read more about whether it makes sense to have your LLC file taxes as a S corp. Importantly, know that having an LLC, while generally viewed as an asset protection tool, does not shield you from professional malpractice liability.
Conclusion
Deductions are a powerful tool for those engaging in side gigs, businesses, and 1099 independent contractor work. It’s important to know the options available to you to reduce your overall tax burden if you are engaging in telemedicine work as a non-W2 employee. Because of the nature of telemedicine work, not all deductions available to 1099 physicians will apply, so when in doubt about whether a tax deduction makes sense for a telemedicine physician to take, talk to your accountant about your specific situation. Particularly if you are new to self-employed work, we highly recommend working with an accountant to get an idea of what qualifies as deductible expenses to avoid potential issues with the IRS.
Additional resources for telemedicine physicians
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