Locum Tenens Taxes in Virginia

Virginia residents file Form 760 and report all income regardless of where it was earned. Nonresidents with Virginia-source income file Form 763, and part-year residents file Form 760PY. The filing thresholds are low: you must file once Virginia adjusted gross income exceeds $11,950 (single) or $23,900 (married filing jointly). Any meaningful locum assignment clears those numbers.

Form 763 works on a proration: Virginia computes tax on your income as if the full progressive schedule applied, then multiplies by the ratio of Virginia-source income to total income. Because the top bracket starts at $17,000, the practical effect is that your Virginia-source income is taxed at roughly 5.75%.

The DC metro is the part of the country where "which state taxes this assignment" genuinely changes every few miles. Here is the framework.

Virginia has reciprocity agreements with the District of Columbia, Kentucky, Maryland, Pennsylvania, and West Virginia. Under these agreements, a resident of one state who earns salaries and wages in the other is generally taxed only by their home state. That is genuinely useful for a W-2 locum who lives in Virginia and takes hospital-employed shifts across the Maryland line, subject to each agreement's specific conditions.

Why reciprocity rarely helps 1099 locums

Reciprocity agreements cover wage income. Independent contractor income paid on a 1099 is not wages, so the agreements generally do not apply. A Virginia-resident 1099 locum who works an assignment in Maryland is taxed by Maryland on that income as a nonresident, files a Maryland nonresident return, and then claims a credit on the Virginia return. The same logic runs in reverse for a Maryland-resident 1099 locum working in Virginia.

The DC exception that works in your favor

The District of Columbia is prohibited by federal law from taxing nonresidents on income earned in the District. This is not a reciprocity agreement; it is a hard limit on DC's taxing power. A Virginia (or Maryland, or anywhere else) resident who works a locum assignment at a DC hospital, whether W-2 or 1099, generally owes no DC income tax and files no DC return. The income is simply taxed by the home state. For Virginia-based locums, DC assignments are the cleanest cross-border work available: one state, one return, 5.75%.

W-2 locum agencies generally withhold Virginia tax on wages for work performed in Virginia (or home-state tax where reciprocity applies and the right exemption form is on file). 1099 locums get no withholding at all, which means the entire Virginia liability accrues silently until you either make estimated payments or get a bill at filing time.

Virginia requires individuals to make estimated payments (Form 760ES) when their expected Virginia tax, after withholding and credits, exceeds a modest threshold, so essentially every 1099 locum with Virginia-source income should be paying quarterly. Underpayment triggers an addition to tax computed on Form 760C.

A practical rule of thumb for planning purposes: set aside roughly 5.75% of gross Virginia-source 1099 income for Virginia, on top of your federal set-aside, then refine with actual deductions. Our estimated taxes guide covers the federal side of the quarterly system.

The standard locum S-corp analysis (save self-employment tax on the distribution side of a reasonable-compensation split) works normally in Virginia. There is no California-style minimum franchise tax on S-corps, and no separate entity-level income tax on an S-corp's ordinary operations beyond registration-type fees.

Virginia also offers an elective pass-through entity tax (PTET): a qualifying S-corp or partnership can elect to pay Virginia tax at 5.75% at the entity level (Form 502PTET), and the owners claim a refundable credit for their share on their individual returns. The election was originally scheduled to sunset after 2025, but the sunset was removed, so it remains available. The point of the election is federal: state tax paid by the entity is deducted against business income without running through the individual SALT cap.

Whether PTET helps you depends on the federal SALT cap math for your income level (the cap phases back down for high earners), whether you itemize, and how much total state tax you pay. For a locum with multi-state income, the modeling has to account for which state's PTET you elect and how credits interact. This is exactly the kind of question to run through a multi-state tax planning engagement rather than guess at.

Illustrative example, not a specific client outcome. A hospitalist lives in Arlington, Virginia and earns $300,000 of 1099 locum income for the year: $150,000 from Virginia hospitals, $60,000 from a DC hospital, and $90,000 from Maryland assignments.