Remote Medicine, Real Taxes: What Doctors Working Online Need to Know

June 2, 2025

The way physicians practice has shifted. If you’re delivering care remotely—full time or just supplementing your income—you’re operating in a different tax environment. One that requires more tracking, more strategy, and yes, more decisions.

This guide walks you through what doctors working in telemedicine need to understand about taxes—and how to make it all work in your favor.

How should telemedicine income be reported for tax purposes?

It depends on how you’re contracted.

  • W-2: Your employer handles withholdings. You’ll get a W-2.

  • 1099 contractor: You’re self-employed and responsible for all taxes.

If you’re doing both, you’ll need to report both types of income. Platforms sometimes skip or misreport 1099s, so keep your own records too.

See: 1099 contractor tax guide

Does telemedicine qualify as self-employment or W-2 income?

Either one.

Some telehealth companies classify physicians as employees, others as contractors. If taxes aren’t withheld from your paycheck, you’re likely self-employed.

Should I form an LLC or S-corp for my telemedicine work?

It’s worth considering if you earn more than part-time income.

  • LLC: Simple setup, limited liability

  • S-corp: Potential tax savings by splitting salary and distributions

Want to see how S-corps help physicians? Explore tax benefits of establishing one

Can I split income across platforms or states for tax strategy?

Not exactly—but you do need to track where your patients are.

If you’re licensed and seeing patients in multiple states, you could owe income tax in each one. Some states offer credits or exemptions, but many don’t.

Working across jurisdictions? Doctor tax saving strategies for 2025 may offer clarity.

What expenses can be deducted for telemedicine?

These are common:

  • Internet, software, cloud storage

  • EHR subscriptions and telehealth platforms

  • Malpractice insurance

  • Medical equipment

  • CME expenses

  • Business-related travel

Yes, even business vacation deductions can apply in certain cases.

Can I deduct my home office?

Yes, but only if it’s:

  • Used exclusively for work

  • Used regularly for your telemedicine practice

You can use either the simplified method or actual expense method. Both can reduce your taxable income.

Are internet and phone bills deductible?

Partially. Deduct the business-use portion.

So if 70% of your internet usage is for telehealth work, deduct 70% of the bill. Same with your phone—if you’re using it for scheduling, follow-up, or consults.

What about telehealth platforms or electronic medical records?

Absolutely deductible.

That includes:

  • Doxy.me

  • Zoom for Healthcare

  • Amwell subscriptions

  • EHR platforms

Just be sure they’re used only for business.

Do I owe taxes in every state where I see patients?

Possibly, yes.

Telemedicine often creates nexus in multiple states. That means:

  • You might owe non-resident income taxes

  • You could need to file several state returns

  • Penalties apply if you don’t comply

If you’re juggling multiple states, consider working with a tax advisor who understands multi-state income streams.

Do licensing rules affect where I owe taxes?

Not directly. But if you’re licensed in a state and seeing patients there, then yes, you’re likely generating taxable income there.

It’s not about where you sit—it’s about where your patients are.

Is there a risk of double taxation?

Yes. And it’s easy to miss.

If:

  • You live in one state

  • You’re licensed in another

  • And you see patients in a third…

Then you could owe taxes in all three.

The solution? Careful planning and often a better business structure

What retirement plans are good for telemedicine doctors?

If you’re self-employed:

  • Solo 401(k): Roth and pre-tax options, high contribution limits

  • SEP IRA: Simple setup, no Roth option

  • Defined Benefit Plan: Best for high-income earners looking to defer a lot of tax

These are especially useful when paired with a pass-through entity like an S-corp.

Can I use a solo 401(k) or SEP IRA?

Yes, if you’re earning 1099 income.

Contribution limits (for 2025):

  • Solo 401(k): Up to $69,000 (including catch-up)

  • SEP IRA: 25% of net income, capped at $69,000

Both reduce your taxable income.

Does telemedicine income affect Roth IRA limits?

Yes, especially if it pushes your income over Roth contribution thresholds.

But there’s a workaround: the backdoor Roth strategy.

It’s not always straightforward. A tax advisor can help make sure you don’t trigger unnecessary taxes.

Are there unique IRS rules for telemedicine?

Not really—but you’re still subject to:

  • Self-employment taxes

  • Accurate recordkeeping

  • Quarterly estimated payments

If you want to stay compliant, IRS tax tips are a helpful resource.

How do I claim business deductions without violating HIPAA?

Keep tools separate.

Don’t mix personal and professional email, software, storage, or calendars. You can still deduct these expenses, just make sure they’re compliant.

If you’re handling PHI, make sure your tech stack meets HIPAA guidelines.

Do I need business insurance for telemedicine?

Yes. You might need:

  • Professional liability (malpractice)

  • Business liability

  • Cybersecurity insurance

Some practices use private insurance structures to protect income and create tax savings. Learn more about self-insurance strategies here.

How can a tax advisor help?

A tax advisor can:

  • Structure your business properly

  • Reduce multi-state exposure

  • Identify deductible expenses

  • Set up retirement savings

  • Forecast quarterly payments

A proactive tax plan often saves doctors more than they realize.

What tax mistakes do remote doctors make?

Some of the most common:

  • Not saving for quarterly taxes

  • Missing state filing requirements

  • Overlooking deductions (tech, CME, software)

  • Forgetting to track multi-platform income

And many miss market-based tax opportunities during downturns.

Should I track each income source separately?

Yes. Even if it all funnels into one account.

Tracking:

  • Income by platform

  • Expenses tied to each

  • State-level income

Helps you stay organized and avoid overpaying.

Extra Insight: Diversifying Your Income Stream

Some physicians are exploring non-clinical income like consulting, coaching, or education.

Others are preparing for major transitions—like selling a medical practice or even relocating for better tax conditions.

Even tools like captive insurance can play a role in protecting your income while building tax-advantaged wealth.

FAQ

Q: Should I start an S-corp if I’m only doing part-time telemedicine?
A: Maybe not. The cost and admin burden only make sense once you’re earning $100K+ from that stream.

Q: What’s the biggest risk with multi-state telemedicine?
A: Missing a state return and owing unexpected penalties.

Q: Can I deduct software I use for both personal and work purposes?
A: Yes—but only the percentage used for business.

Q: What if I see patients from another country?
A: It’s complicated. You’ll need to understand U.S. source rules, and possibly foreign tax laws too.

Q: How can I legally lower my tax bill this year?
A: Track every expense, contribute to retirement accounts, and consider working with a physician-focused tax advisor.

Visit contact physiciantaxsolutions.com to schedule a consultation and learn how we can help you take control of your tax strategy today.

This post serves solely for informational purposes and should not be construed as legal, business, or tax advice. Individuals should seek guidance from their attorney, business advisor, or tax advisor regarding the matters discussed herein. physiciantaxsolutions.com assumes no responsibility for actions taken based on the information provided in this post.

 

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