Locum tenens work offers unmatched freedom and flexibility. For some physicians, that freedom extends across borders.
Whether you’re drawn to overseas contracts for higher pay, professional experience, or simply the chance to practice in a stunning locale, there’s more to consider than your passport and plane ticket.
Tax compliance is critical and complex when practicing medicine internationally, especially when it comes to locum tenens international taxes.
Today, we’ll explore what you need to know before saying “yes” to an international assignment, including:
- Foreign Earned Income Exclusion (FEIE)
- Self-employment taxes for locums working abroad
- Tax treaties and how they prevent double taxation
- Tax Home and Travel Expense Deductions
- The advantages of setting up an LLC and filing as an S-Corp
- Full transparency and reporting
Let’s get started.
Foreign Earned Income Exclusion
One of the first hurdles to overcome when working abroad is the issue of double taxation. Even if you’re earning income abroad, the IRS still wants its share. Fortunately, the Foreign Earned Income Exclusion can help reduce your US tax liability. If you qualify, the FEIE allows you to exclude up to $126,500 of foreign-earned income (as of 2025) from US taxation.
The FEIE can help eliminate or reduce taxes on:
- Salaries
- Wages
- Bonuses
- Commissions
To qualify for the FEIE, you must earn income in a foreign country and pass one of these two tests:
- The Bona Fide Residence Test: This test looks at whether you have established genuine residency in another country for a full tax year. Key indicators include:
- Renting or owning a home abroad
- Paying taxes in that country
- Establishing personal and professional ties
- Intending to remain long-term
- The Physical Presence Test: This test is more straightforward, requiring you to be physically present in a foreign country for at least 330 full days during any 12-month period. Partial days, time spent in the US, or days traveling won’t count.
While the bona fide residence test is more challenging to qualify for, it is more flexible than the physical presence test. However, given that most locum providers working abroad plan to return to the US at some point, most qualify using the physical presence test. That said, the FEIE does not cover self-employment taxes. As a locum tenens physician, you may still owe US self-employment taxes unless you structure your business strategically.
For example, a US physician working a two-year contract in the UK, with a temporary residence and no intention to stay long-term, may not meet the Bona Fide Residence Test but could qualify under the Physical Presence Test after 330 qualifying days.
Self-Employment Taxes for Locums Working Abroad
One of the most overlooked areas of international taxes for locum tenens providers is the obligation to pay self-employment taxes. While the FEIE can help you avoid double taxation from many sources, you are still required to pay self-employment taxes for Social Security and Medicare, which amount to 15% of your income.
It is possible to reduce or eliminate your obligation to pay self-employment taxes by setting up an LLC and filing as an S-Corp. This allows you to:
- Designate a reasonable salary (up to the Social Security wage cap of $176,100)
- Pay employment taxes only on wages above the salary threshold
- Take the remainder of your income as distributions
This structure can significantly reduce your self-employment tax liability.
Recommended Reading
LLC for Locum Tenens: Why Independent Physicians Should Consider This Smart Move
Tax Treaties and How They Prevent Double Taxation
While the FEIE offers significant tax relief, it’s not the only tool available. The United States has tax treaties with many countries, including popular locum tenens destinations like Canada, Germany, and New Zealand, that provide additional ways to reduce or avoid double taxation.
These treaties often include provisions that can:
- Reduce or eliminate foreign withholding taxes on income you earn abroad.
- Offer tax credits for taxes already paid to the foreign government, so you’re not taxed twice on the same income.
- Include specific rules for independent contractors, which may benefit physicians working locum assignments internationally.
However, tax treaty benefits aren’t applied automatically. To claim them, you need to understand the terms of the specific treaty for the country where you’re working and file the necessary forms, often before earning the income.
Because each country’s rules can differ significantly, staying on top of these requirements is essential. Understanding how treaty provisions apply to independent contractors and cross-border income is crucial for anyone navigating locum tenens international tax matters.
Tax Home and Travel Expense Deductions
The IRS uses your “tax home” to determine whether you can deduct travel-related expenses. Your tax home is generally the city where you work most of the time. However, if you have a residence in the US, you cannot designate a foreign area as your tax home.
Depending on the length of your assignment, you may or may not be able to designate your work country as your tax home:
- Temporary assignments (less than 1 year): Your US location remains your tax home
- Indefinite assignments (more than 1 year): Your foreign location may become your new tax home
This classification affects your eligibility to deduct meals, lodging, and other travel costs. Strategic planning is key to making these deductions work in your favor.
Simplify Global Tax Filing with an LLC and S-Corp Election
Working in multiple countries as a locum tenens provider can make tax filing complicated. Forming an LLC and electing S-Corp status is one way to simplify the process. This setup can help centralize your income and streamline your reporting, particularly when assignments span multiple foreign jurisdictions within the same year.
Key benefits include:
- Consolidated income reporting for easier tax filing.
- Simplified bookkeeping that helps keep records clear and organized.
- Better tracking of business deductions so nothing falls through the cracks.
This approach may not be suitable for everyone, but it can offer significant efficiencies for those with diverse international contracts. A CPA with experience in locum tenens finances can help assess whether this structure is a good fit for your situation and guide you through the necessary steps if it is.
Avoid Penalties with Accurate Foreign Asset Reporting
US citizens working abroad are subject to strict reporting requirements. Failure to disclose foreign assets can result in severe penalties. You must report:
- Foreign bank accounts (FBAR)
- Signature authority on accounts
- Foreign business interests
- Foreign-held trusts or real estate
Non-compliance, even unintentional, can result in fines of $10,000 or more per violation. We help ensure your filings are accurate and complete.
Keep More of What You Earn with Smart Tax Strategies
Figuring out taxes when you’re working internationally can feel complicated, but it doesn’t have to be. When you work with a CPA who truly understands the locum tenens lifestyle, you can lower your tax bill and feel more confident about your financial future.
The Doctor’s CPA specializes in international tax compliance for locum tenens physicians. From FEIE qualification to LLC formation and foreign asset disclosures, we specialize in international taxes for locum tenens providers, helping ensure your global assignments are financially optimized and fully compliant.
Ready to make your international locum opportunity financially rewarding Schedule a consultation with The Doctor’s CPA today.