How do I report income from telemedicine services on my tax return?

How you report income from telemedicine services depends on your employment classification. The IRS distinguishes between W-2 employees and independent contractors, and the difference has significant tax implications.

If You Are a W-2 Employee

Telemedicine providers employed directly by a hospital, clinic, or telehealth platform receive a Form W-2 at year-end. Your gross wages are reported on Line 1a of Form 1040. Federal income taxes, Social Security, and Medicare are withheld by your employer. You may not deduct unreimbursed employee business expenses on your individual return under current law (the TCJA suspended miscellaneous itemized deductions through 2025).

If You Are an Independent Contractor (1099-NEC)

Many telemedicine providers contract with multiple platforms or operate their own practice. If you receive a Form 1099-NEC, you are self-employed and must report all gross income on Schedule C (Form 1040), regardless of whether you received a 1099 for every payment. On Schedule C you may deduct all ordinary and necessary business expenses, including:

• Medical equipment and diagnostic tools used for patient care
• Software subscriptions (EHR systems, telehealth platforms, billing software)
• Internet and phone (allocated percentage for business use)
• Continuing medical education (CME) and licensure fees
• Home office deduction for a dedicated, exclusive workspace (Form 8829)
• Malpractice and professional liability insurance premiums
• Health insurance premiums (above-the-line deduction on Schedule 1 if ineligible for employer-sponsored coverage)

Self-Employment Tax

Net self-employment income from Schedule C is subject to SE tax at 15.3% on the first $176,100 of net earnings and 2.9% above that threshold for 2025. SE tax is calculated on Schedule SE. You may deduct one-half of your SE tax as an above-the-line deduction on Schedule 1 (Form 1040).

Qualified Business Income (QBI) Deduction

Independent contractor physicians may be eligible for the 20% QBI deduction under IRC §199A, subject to income limitations and specified service trade or business (SSTB) rules that apply to healthcare professionals.

Estimated Quarterly Payments

Self-employed providers with an expected tax liability of $1,000 or more must make quarterly estimated payments using Form 1040-ES. 2025 due dates: April 15, June 16, September 15, and January 15, 2026.

Note: If you perform services through a professional corporation (PC) or S-corp, income flows through different forms (W-2 wages + K-1 distributions). Consult a CPA for entity-specific guidance.

Sources:

IRS Schedule C (Form 1040) - Profit or Loss from Business

IRS Schedule SE (Form 1040) - Self-Employment Tax

IRS Publication 334 - Tax Guide for Small Business

IRS Publication 587 - Business Use of Your Home (Form 8829)

IRC §1401 - Self-employment tax

IRC §162 - Trade or business expenses

IRC §199A - Qualified Business Income Deduction

IRS Rev. Proc. 2024-40 - 2025 inflation adjustments (SE wage base)

IRS Form 1040-ES - Estimated Tax for Individuals