Key Takeaways
- Update your W-4 the week you start. The default settings are built for people earning far less than an attending.
- Signing bonuses are withheld at a flat 22 percent supplemental rate, but most attendings sit in the 32 or 35 percent bracket. That gap shows up in April.
- If your employer offers a 457(b) alongside a 403(b), the limits are separate. That can shelter roughly $48,000 of pre-tax income in 2026.
- Most residencies end June 30, so year one blends two very different incomes with withholding set for the smaller one.
- Disability insurance discounts of 20 to 30 percent usually expire within 60 days to 6 months of finishing residency.
You spent the better part of a decade earning less than a first-year teacher. Now, almost overnight, your income has tripled or more. That transition from residency to attending is one of the most financially significant moments of your career, and the tax implications arrive before most people are ready for them.
Year one as an attending is not just a pay raise, it is an entirely new tax situation. Your withholding needs to change, your bonus income will be taxed differently than you expect, and for the first time, many of the tax-advantaged retirement accounts you barely used in residency are now genuinely powerful tools.
Why year one matters more than you think
Most residents come out of training with a relatively simple tax picture. One employer, one W-2, modest income. The W-4 on file probably worked fine.
As a new attending, that simplicity is gone. You may be earning $250,000 to $400,000 or more. If you are a 1099 contractor, you are now responsible for your own withholding. If you received a signing bonus, that payment was likely taxed at a flat supplemental rate that does not reflect your actual bracket. And if you are at a hospital system with a 401(k), 403(b), or 457(b), your contribution limits have jumped significantly.
Getting these pieces wrong does not just mean an unexpected tax bill in April. It means penalties for underpayment, missed compounding on retirement contributions, and financial stress that could have been avoided with a clear plan from day one.
Step one: update your W-4 immediately
Your W-4 tells your employer how much federal income tax to withhold from each paycheck. The default settings on many W-4s are designed for people earning far less than a typical attending salary. They often withhold too little for high earners because they do not account for multiple income sources in the same tax year, the jump into the 32 or 37 percent federal bracket, state income taxes, or a spouse's income.
What to do: Request a new W-4 from HR as soon as your employment begins, and use the IRS Tax Withholding Estimator to calculate the right amount based on your projected annual income.
Understanding your signing bonus
Signing bonuses are common in physician employment agreements. If you received one, you may have noticed the withholding looked surprisingly high. That is because supplemental wages are subject to federal supplemental withholding, a flat 22 percent for amounts up to $1 million as of 2026. For high earners whose effective rate is higher than 22 percent, the bonus was actually under-withheld relative to your true liability.
If your signing bonus was $20,000 to $50,000 or more, and your marginal rate places you in the 32 or 35 percent bracket, you may owe additional taxes on that income when you file. This catches many new physicians off guard in their first April as an attending. The solution is proactive: adjust your ongoing withholding to account for the shortfall, or make an estimated tax payment.
Watch for repayment clawback clauses, too. Many signing bonuses require you to return the money if you leave within one to three years, and the tax treatment of that repayment is complex. Discuss it with a tax professional before making employment decisions.
Retirement contribution limits: use every dollar
In residency, the contribution limits existed, but low income made it difficult to hit them. Now you can. For 2026, the employee contribution limit for 401(k) and 403(b) plans is $24,000, up from $23,500 in 2025. If you are 50 or older, you may contribute an additional $7,500, for a total of $31,500.
Physicians employed by hospitals, health systems, or academic medical centers often have access to a 457(b) deferred compensation plan in addition to a 403(b). What makes this valuable is that the contribution limits are separate. In 2026 you can contribute up to $24,000 to a 457(b) on top of your 403(b) or 401(k). For an attending earning $300,000 or more, that is another $24,000 shielded from your current-year tax bill.
Governmental 457(b) plans also offer a special catch-up in the three years before normal retirement age, potentially up to double the annual limit. You cannot use both the age-50 catch-up and the special catch-up in the same year. Note that non-governmental 457(b) plans remain subject to the employer's creditors, so your assets are not held in trust the way they are in a governmental plan.
What to do: Not every employer offers a 457(b). If yours does, ask HR about it in your first week. Many physicians are not aware the option exists.
The backdoor Roth IRA: start now
As a new attending, your income will almost certainly exceed the IRS limits for direct Roth IRA contributions, $165,000 for single filers and $246,000 for married filing jointly in 2026. The backdoor Roth strategy lets high earners contribute through a two-step process: make a non-deductible contribution to a traditional IRA, up to $7,000 in 2026 or $8,000 if you are 50 or older, then convert it to a Roth.
The conversion is generally not taxable if the traditional IRA had no pre-tax funds. One important caveat: the pro-rata rule means existing pre-tax IRA balances can complicate the math. If you have a rollover IRA from residency or prior employment, get advice before executing the conversion.
Quarterly estimated taxes: who needs to pay them
If you are a W-2 employee at a hospital or health system, your employer handles withholding, and as long as your W-4 is right you generally do not need quarterly payments. You may need them if you have 1099 income from locum tenens work, consulting, medical directorships or expert witness fees, if you have investment income not subject to withholding, or if your W-4 withholding is insufficient.
The IRS requires quarterly estimated payments if you expect to owe at least $1,000 in federal taxes after withholding and credits. The underpayment penalty is relatively modest but avoidable.
The half-year problem
This applies to most new attendings, since most residency programs graduate physicians on June 30. If you begin July 1 and earn $300,000 annualized for the second half, your year-one income might be roughly $37,500 from residency plus $150,000 from your attending role, about $187,500 total, with withholding set up as if you earned much less.
That $187,500, concentrated in the second half of the year, still places many new attendings in the 32 percent federal bracket, while residency-era withholding under-withheld for that level. The fix is simple: set your W-4 to reflect your annualized attending income, not your blended year-one income.
Do not overlook income protection
Tax setup and retirement contributions get most of the attention in year one. But disability insurance quietly carries more financial risk than almost anything else on this list. Your income is your most valuable financial asset. A physician earning $300,000 a year for 30 years represents $9 million in future earnings.
What many new attendings do not realize is that the window for the best rates, with residency discounts of 20 to 30 percent off premiums, closes quickly after graduation. Most insurers allow new graduates to claim these discounts within 60 days to 6 months of finishing residency. After that, the savings are gone, and any new health conditions developed since training could affect your coverage or cost.
Common mistakes, and how to avoid them
Waiting until April to think about taxes. Planning is most effective during the year. Changes to withholding, contributions and estimated payments only help going forward.
Assuming employer-provided guidance is comprehensive. HR onboarding walks you through benefits enrollment, not financial strategy. No one at the benefits desk is advising you on the backdoor Roth or whether a 457(b) fits your situation.
Not updating withholding after major life changes. Marriage, a new dependent, a spouse returning to work, or a change from W-2 to 1099 status all warrant a fresh look.
Overlooking the student loan interest deduction phase-out. For 2026 it phases out completely above $100,000 for single filers and $205,000 for married filing jointly. Many new attendings are phased out in their first full year.
Conflating gross and net income. Your $300,000 salary is not $300,000 take-home. After federal and state taxes, FICA, retirement contributions and benefits premiums, many attendings take home 55 to 65 cents of each gross dollar. Running your plan on gross income leads to overconfident spending and underestimated savings targets.
Frequently Asked Questions
How are physician signing bonuses taxed?
Signing bonuses are usually taxed at a flat federal supplemental rate of 22 percent. However, most attendings fall into the 32 or 35 percent marginal bracket. This creates a gap of roughly 10 to 13 percent on the lump sum, which must be covered through additional withholding or estimated payments to avoid a surprise tax bill.
Can I contribute to both a 403(b) and a 457(b) in the same year?
Yes. Physicians at hospital systems often have access to both, and the contribution limits are separate. In 2026 you can contribute up to $24,000 to a 403(b) and an additional $24,000 to a 457(b), allowing you to shield up to $48,000 of pre-tax income.
Tax laws and contribution limits change annually. References to tax rates, contribution limits and income thresholds are based on 2025 to 2026 IRS guidelines and are subject to change.
Tony leads Attend Wealth, a fee-based wealth management firm in Atlanta serving professionals, families, physicians, and business owners. Advisory services are held to a fiduciary standard. More about Attend
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