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Your First Paycheck as an Attending Physician

While your first attending paycheck will likely be a vast improvement over what you’re used to as a resident, what actually hits your bank account during that first pay period might end up being a lot less than you expect. Every year, we see this sticker shock in posts from freshly graduated trainee physicians and early career attendings. Many residents and fellows transitioning into practice plan major life changes around their new salary, such as how much they can afford to spend on a new house, rent, or the infamous first doctor car after finishing training. Knowing what to expect in your account so that you can budget accordingly as you transition into a new job is a critical part of setting your personal finances up properly for this new stage of your career. It's also very important to understand everything that's being deducted from your paycheck by reviewing your paystub so you can ensure that you're not inadvertently paying for things that you were automatically signed up for, so keep this article and cross check it against that first attending paycheck!


Note: This article is part of our resources for graduating residents and fellows and transition to practice series. We’ve compiled a list of other relevant resources below. If you are not a part of our transition to practice series and would like to sign up, you can find the sign-up link at the top of our transition to practice guide.


Disclaimers/Disclosures: We do not provide individualized advice and are not formal financial, legal, or otherwise licensed professionals. You should consult these parties as appropriate and do your own due diligence before making decisions based on this page.


Comparing your gross pay and net pay for your first paycheck as an attending physician




Your Salary As An Attending Physician


Your salary is the amount you agree to during your contract negotiations with your employer. This is the gross amount of income that will be the base amount of income you will report for taxes, before tax deductions and tax credits.


This is not the amount you will actually receive for your first attending paycheck. You can not just divide your salary by 12 and assume that you will have that much money coming into your bank account every month. There are several different deductions that, if you are a W-2 physician, your employer will automatically withdraw and handle for you.


If you are a 1099 physician, you will likely bring home the full amount, but it’s important not to budget for this entire amount, as you will need to set aside many of the deductions below yourself before planning on what to live off of.




Your First Attending Paycheck


What you bring home in your first attending paycheck is known as your net take home pay. Depending on the different benefits you have at work, you may have some or all of the following deducted from your salary before your employer pays you.


As you can probably guess, the largest chunk that comes out of your salary in your paycheck is usually taxes.


What Taxes to Expect in Your First Attending Paycheck


Federal Income Tax


Federal income tax is usually the majority of the taxes that you pay from your paycheck. The US has a marginal tax bracket system, where different pools of income are taxed at different rates, which progressively increase in percentage on each tier as you earn more money. This is an important distinction that many early attending physicians confuse. Just because you will be a high income earner making a $250,000 salary a year doesn’t mean you’ll owe 35% federal income tax on all the income you make. You’ll only owe that percentage on the income included in that tax bracket bucket.


When you onboard for your new job, your employer should have you complete a form W-4 as part of the process. This IRS form determines how much your employer should automatically withhold in income tax for you and submit to the IRS on your behalf from each paycheck. Your personal situation will determine the amount of federal income tax to withhold, depending on:

  • How many children or other dependents you have

  • If you are married

  • If you or your spouse have other sources of income


When in doubt, many physicians just claim zero withholdings, so that they won’t get hit with a big tax bill at the end of the year for under withholding. That’s an okay approach, but when tax time comes around, if you get a huge refund, you will want to adjust the withholdings, as there’s no point in giving Uncle Sam a tax free loan and giving up on the potential earnings on that money in the interim.



A Note on Bonuses

Tax withholdings on bonuses can be different from the standard withholding calculation you set up with your W-4.


Learn more about tax withholdings on bonuses on our taxes primer.


State and Local Income Taxes


Depending on what state, county, and city you live in, you may also be subject to different local income taxes in addition to federal income taxes. These taxes may be marginal tax systems or flat taxes, depending on where you live. Some local areas have much higher tax rates than others, and some don’t have any, so it’s important to know what to expect, as these will generally be deducted from your gross pay in your paycheck as well. Look up the taxes for your exact location, particularly if you live in an area like NYC or California, as these will be significant additional deductions from your paycheck and definitely affect your budgeting.


Social Security and Medicare Taxes


You’ll also see on your first pay stub deductions from your salary for Social Security and Medicare taxes.


Social Security is a flat 6.2% on all income up to $168,600 (for 2024). Once you’ve had gross taxable earnings of $168,600 for the year, you will no longer have to pay this tax, so many physicians will notice that their paycheck increases later in the year. That’s not because you got a raise - it’s just because you’ve capped out on the Social Security taxes you needed to pay to fill that bucket for the year. Next January, your paycheck will look smaller again until it’s full again.


Medicare is a flat 1.45% tax on all of your taxable wages. In addition to standard Medicare tax, there is also a 0.9% Additional Medicare Tax for taxable wages that exceed the following threshold amounts based on filing status:

  • $250,000 for married filing jointly;

  • $125,000 for married filing separately; and

  • $200,000 for all other taxpayers


It’s important to note here that your taxable Social Security and Medicare wages may not be your full salary if you have tax deductions that come out of your paycheck pre-tax. (See each section below.)



Insurance Premiums


If you have employer-sponsored insurance plans, you will also see deductions from your first paycheck for your portion of these premiums. While there are some employers that cover 100% of their employee’s premiums, many employers subsidize it instead, leaving you responsible to pay for a portion. Your portion of your premiums should have been provided to you when you enrolled in your benefit plans through the HR department.


Group Health, Vision, and Dental Insurance


Health insurance, vision insurance, and dental insurance usually all have employee portions that are deducted from your gross pay each paycheck. Your health insurance premium is typically the largest chunk that comes out.


These premium payments are deducted from your paycheck pre-tax, which lowers your Social Security and Medicare wages as mentioned above.


Note for Self-Employed or 1099 Physicians

If you are self-employed or a 1099 contractor physician, your health insurance premiums are often tax deductible as well on your tax return.



Individual health insurance plans are often more expensive, but are critical to helping protect your health and your wealth from huge, unexpected medical and hospital bills.




Group Life and Disability Insurance


If your employer offers group plans for life and disability insurance and you opt in, you’ll also see your policy premiums deducted from your paycheck. While these plans can be nice to have, especially if for some reason you’re disqualified from purchasing an individual plan, these employer group plans are often inferior and should typically be used only to supplement an individual plan.


Also note that particularly for life insurance, if you are paying anything out of pocket for these and are young and healthy, it’s probably worth buying your own life insurance and then making a call to HR to tell them you don’t want their coverage. Because these employer life insurance plans insure the mean age and health status of the entire employee base, your $500 in premium annually towards an employer life insurance plan may give you only a few hundred thousand, if that, in death benefit, while it may give you over a million in health benefit with your own personal life insurance plan.


Life and disability insurance for residents and fellows

Learn more about:



Employer-Sponsored Retirement Plan Contributions


Most large employers offer some sort of tax-advantaged retirement plan such as a 401(k), 403(b), or 457 plan, depending on the type of company.


These retirement plans are key to generating wealth and saving for financial independence. Take advantage of this employee benefit, from any employer match you can get to fully maxing it out up to the annual contribution limits.


Contributions to these plans are deducted from your gross pay in your paycheck, and your employer puts your contributions into your account to manage. Depending on whether you select Roth or traditional, these contributions may be pulled pre-tax or post-tax, which will affect the tax deductions mentioned above, but you will see your contributions subtracted from what you take home regardless.



Depending on how you set up your contributions, you may decide to preload your contributions up to the annual max earlier in the year or spread them out throughout the year in equal installments, which will change the amount of take home pay you see in each paycheck. 


Important tip: check with HR about how the matching contributions work. For some employers, you will have to make gradual contributions over the year, as they will only match up to a certain amount per pay period.


Note for Retirement Accounts for Self-Employed Physicians

Just because you work for yourself doesn’t mean you lose out on the option for employer-sponsored retirement plans with tax advantages. We cover several different options available for you as well in our guide to self-employed finances.



HSA/FSA Contributions


Depending on the type of health insurance plan you chose through your employer, you may be eligible for either a FSA (flexible spending account) or HSA (health savings account). Any contribution you make into either of these accounts will be pulled pre-tax from your salary and put into the related account by your employer, so make sure you account for them when planning your first paycheck.


Comparing contributions to HSA vs FSA that would get deducted from your first attending paycheck

While both FSAs and HSAs offer tax savings for medical expenses, if a high-deductible health plan (HDHP) is a good fit for you and your family, the HSA can be used as a stealth retirement account with investing options with additional tax advantages. You can only opt into a HSA if you have a qualifying HDHP plan.


Learn more about health savings plans.



Miscellaneous


There may be other miscellaneous deductions from your paycheck such as union fees, parking fees, or otherwise. You may not even know about these upfront. It is extremely important that you review your first paycheck stub for all the things that were deducted and make sure that you weren’t automatically enrolled in a program that you didn’t want to be enrolled in. Some employers have default enrollments that you may have missed hearing about in the midst of all the orientation materials, paperwork, and meeting new people, and you don’t want it to be years before you realize you were paying for that subpar life insurance plan.


If you see a deduction that you can't account for, pick up the phone and call HR and ask them what it's for. Payroll mistakes can be expensive and lead to unexpected tax consequences or a sudden need to pay back amounts of money or leave you scrambling for money to pay for expenses in your monthly budget without digging into your emergency fund.



Conclusion


As you can probably see from all the different paycheck deductions above, what you bring home in your first attending paycheck can be significantly less than what you’d expect from your salary. While many of these deductions work to your advantage and can help lower your taxes, it can still be a shock if you aren’t expecting or planning for them. Make sure to budget accordingly so that you don’t find yourself in a financial pinch right at the start of your career as an attending. Additionally, don’t forget to look at your first paystub from your first paycheck and check that you can account for everything that’s being deducted.



Additional Resources for Residents and Fellows


If you’re a resident or fellow, make sure you watch the recordings of the transition to practice series events on our communities, which answer a lot of other FAQs we see during this time period, as well as other events tailored towards residents and fellows.


Checklist of things to do as a Graduating Resident or Fellow


Securing your life and disability insurance


Contract negotiations and Job Search


Personal Finance


Student Loan Refinancing


Side Gigs for Residents and Fellows


Figuring out what to do with retirement accounts


Housing for physicians

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