Geographic Arbitrage for the Locums Dermatologist
I'll say up front that I haven't built my own locums career around this. I practice where it makes sense for my life and not where a spreadsheet tells me to. But readers ask about it, and the underlying principles are worth understanding even if you only ever use one aspect of them. Locums happens to be one of the few ways to practice dermatology that makes geographic arbitrage possible.
The idea is straightforward. Geographic arbitrage means earning in a way that isn't tied to where you spend. A remote tech worker who earns a San Francisco salary while living in a small town is doing it. As a locum, you have a version of this available that most employed dermatologists don't: you can choose where you work, where you live, and often let someone else cover the cost of being on-site.
Here’s a breakdown of geographic arbitrage and how you can use it to benefit financially:
Where you earn: state income tax
This is the one people seem most aware of, and it's also the one they often misunderstand. You generally owe income tax to the state where you physically do the work, filed as a non-resident. Your home state then taxes your worldwide income but credits you for taxes paid elsewhere, so you aren't fully taxed twice.
What that means in practice: living in Florida does not get you out of California income tax on an assignment you work in California. The state where you saw the patients wants its cut regardless of your address. The arbitrage only shows up when two things line up. You establish genuine residency in a state with no tax on earned income (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming), and you favor assignments in those same no-tax states. Income earned working in a no-tax state, while domiciled in a no-tax state, escapes state income tax entirely.
A caveat: residency is a legal status and not a mailing address. High-tax states like California and New York are known to audit departing residents aggressively, and they look at where your home, your family, your cars, and your life actually are. You don't get to claim Florida from a condo you visit twice a year. If you're going to go this route, do it properly and with a trusted CPA, because the multi-state filing alone gets complicated fast.
What you earn: the pay-to-cost ratio
Another key aspect of effective geographic arbitrage is the gap between what an assignment pays and what it costs you to live there. Hard-to-staff and rural areas often pay a premium precisely because they're hard to fill, and those same areas usually have a low cost of living. That combination, a high rate in a cheap place, is the sweet spot. I touch on this in the day rate post: undesirable-to-fill means better pay for you.
What you spend: let the assignment carry your costs
Here's the piece unique to locums. On a well-structured out-of-state assignment, the clinic covers your travel and housing. That means your personal cost of living while you're on-site can drop close to nothing. You're not paying a mortgage and a hotel at the same time in any productive sense, because one of them is reimbursed. If you keep your home base lean and let assignments cover your on-the-road expenses, a large share of each check is bankable rather than spent. Over a few years, that savings rate is the entire point, and it's how some physicians use locums as a runway to financial independence.
So what are the catches?
The catches are mostly the familiar downsides of the locums career path:
Licensing costs stack up. Chasing assignments across many states means paying for multiple licenses and DEA registrations. The IMLC helps, but it's still real money and time.
The lifestyle has a price. Optimizing purely for dollars can mean constant travel to places you wouldn't otherwise choose, always being the new outsider, and eating dinner alone in a lot of hotel rooms. That cost doesn't show up on the spreadsheet.
It only works if you actually bank it. Arbitrage does nothing if the extra income just funds a bigger lifestyle. The savings have to leave your checking account.
So is it worth doing?
I think that for most dermatologists, the most realistic approach is to use a lever or two of geographic arbitrage rather than reorganizing your whole life around this. Favoring a well-paying assignment in a low-cost area - or being deliberate about residency if you're already inclined to move - captures a lot of the benefit without turning your career into an optimization/spreadsheet problem. The people who go all-in tend to be those chasing early financial independence and willing to trade years of heavy travel to get there. Understanding the principles of geographic arbitrage will help you make the best decisions for your own situation.
I'm a dermatologist sharing my own experience, not a lawyer, accountant, or financial advisor, and nothing here is legal, tax, financial, or medical advice. Consult a qualified professional about your specific situation.
