The Paycheck Series · 8 min read
Your Paycheck Decoded
You earned one number. Your bank account saw another. Here is where the rest went — and what you can do about it.
Reviewed by Jonathan Shafer, DO, July 2026. Disclosure: the reviewer is the founder and owner of Attending Financial LLC. This is education, not individualized financial advice.
The number that confused every physician
Your offer letter said $240,000. Your first paycheck looked nothing like that number divided by 26. The difference between gross and net is not a small adjustment. For a physician, it is often 35 to 45 percent of the headline number. Most of that money is recoverable, deferrable, or at least worth understanding. None of it was explained in medical school.
The five things taken out before you see anything
Tap each card. Every physician paycheck has the same five categories of deductions.
Federal income tax withholding
Calculated from your W-4 elections and projected annual income. Often over-withheld for new attendings, leading to a large refund. A large refund is not a win — it is an interest-free loan to the government.
FICA — Social Security + Medicare
7.65 percent of wages up to the Social Security wage base ($184,500 in 2026), then 1.45 percent Medicare on everything above. High earners pay an extra 0.9 percent Medicare surcharge over $200,000.
State income tax
Varies wildly. Nine states have no income tax. California, Hawaii, and New York have top marginal rates above 10 percent, though most attendings there pay a lower marginal rate. Pennsylvania is a flat 3.07 percent. State tax often gets ignored in job comparisons.
403b or 401k contribution
Pre-tax retirement deferral. The 2026 limit is $24,500. If your employer matches dollar for dollar, the match is a 100 percent immediate return on the dollars it takes to capture it.
Health insurance premium
Often $200-600/month for a physician on an employer plan. Family coverage can exceed $1,500/month. Paid pre-tax through Section 125, which lowers your taxable income.
See your real take-home
Run your numbers through the full paycheck decoder. It accounts for federal, FICA, state, , and benefits — and shows you the exact dollars each deduction costs.
Effective vs marginal tax rate
This trips up every new attending. Knowing the difference is worth thousands of dollars in correct decisions.
You and your spouse file jointly on $250,000 of income, which lands you in the 24 percent federal bracket. What is your approximate effective federal tax rate?
You are taxed at the marginal bracket only on income inside that bracket. Income below it is taxed at lower rates. A married-filing-jointly household at $250,000 has an effective federal rate near 15 percent — much lower than the headline bracket. Filing status moves this a lot: a single filer at $250,000 is in the 32 percent bracket with an effective rate near 20 percent. Same principle, different numbers.
The 403b decision
Your first attending year. Your hospital offers a 4 percent on contributions if you contribute at least 6 percent. You have student loans, rent, and a car payment. The form is due Friday.
You feel cash-strapped from residency. You are tempted to skip the entirely and address loans first. What do you do?
Skip 403b — pay down loans first, address retirement later
You leave the match on the table. That is a guaranteed 100 percent return you will never recover. On a $250,000 salary, missing the match costs you $10,000/year before any growth. Over 30 years of compound growth, this single year of missed match alone is worth $76,000+.
Contribute at least enough to get the full employer match — the better choice
Correct. The arithmetic favors capturing the match first. Then evaluate the loan-vs-investing question on the remaining cash. For PSLF candidates, additional 403b contributions also reduce AGI and lower your IDR payment — a double benefit.
Max the 403b at $24,500
Aggressive but reasonable for a high earner who can afford it. The match is captured. For PSLF candidates this is excellent — maximizes tax-deferred growth and minimizes IDR payments. For non-PSLF, weigh against high-interest debt first.
What to do this week
- Your effective tax rate is meaningfully lower than your bracket — never confuse the two when making decisions.
- The 403b employer match is a guaranteed 100 percent return. The arithmetic favors capturing it before anything else.
- Pre-tax 403b contributions lower AGI, which for PSLF candidates lowers your IDR payment as well.
- A large tax refund means you over-withheld. Adjusting the W-4 moves that money into each paycheck instead.
Do this next: Find your most recent pay stub. Identify each of the five deduction categories. Calculate your actual effective tax rate by dividing total tax paid by gross pay.
Residency curriculum · lesson 1 of 38
Next: Tax Brackets for Physicians.
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