California Physician Finance (2026): Taxes, Entities, Pensions

Decision path

Start here: find your situation

1. In residency or matching into California. Your tax picture is simple, but two things matter now: certify PSLF employment from day one (California's corporate-practice rule can make contracted hospital work count; see does my hospital qualify), and moonlight as a sole proprietor rather than an LLC. Watch for CA-SLRP's July 2027 window if you'll practice in a shortage area.
2. Choosing your first attending job. Read the employer comparison below, then the Kaiser salary guide for posted pay and the contract negotiation guide before you answer. Non-competes in your offer are generally void in California.
3. Just hired by UC. You have 90 days. Read the UC Pension Choice vs. Savings Choice guide first and get your covered compensation in writing.
4. A Kaiser associate in years one to three. The Kaiser pension and partner track guide covers the TPMG share purchase, the SCPMG Keogh election deadline and vesting at five years.
5. Adding 1099 income. Start with side income and entities, then the PMC guide. Below roughly six figures of side income, the answer is usually no entity at all.
6. Owning, buying into or selling a practice. Read the 2026 legal picture and the private equity guide; SB 351 changed how MSO deals can be written.
7. Buying a home. See housing for jumbo-loan thresholds and how Prop 13 caps your property tax.
8. Moving into or out of California. Compare take-home pay in the tax tables. An out-of-state PLLC can't practice here, and California taxes nonresidents on work done in the state (1099 taxes guide).

Quick reference

What's different in California

Taxes

California taxes and take-home pay, computed

California taxes wages through two channels: a nine-bracket income tax that reaches 9.3% at about $73,000 of taxable income for a single filer and 12.3% above about $743,000, with an extra 1% above $1 million; and State Disability Insurance, withheld at 1.3% of every dollar of wages in 2026. The SDI wage cap was removed starting in 2024, so a physician earning $500,000 pays $6,500 of SDI, ten times what a $50,000 earner pays, for benefits that are capped by the state's maximum weekly amount.

The tables below use our shared take-home model (the same one behind our take-home pay calculator): 2026 federal brackets and FICA, the standard deduction, no retirement deferrals, one earner. California uses the Franchise Tax Board's 2025 schedules, the latest the model includes.

What California takes, single filer

California vs. Texas and Washington, single filer

Texas and Washington are the usual comparisons: neither taxes wages, and both compete for the same West Coast and Sun Belt physicians. Washington isn't quite zero. It charges employees a Paid Family & Medical Leave premium on wages up to the Social Security base and a 0.58% WA Cares long-term care premium on all wages.

The same comparison for a married couple with one earner

At $500,000, the California cost is $50,621 a year for a single filer and $44,510 for a one-earner couple. Over a 20-year career at that salary, the single filer's gap adds up to about $1,012,427 before any investment growth. At $250,000 it is $22,255 a year. Retirement deferrals shrink the gap a little, because California follows the federal treatment of 401(k), 403(b) and 457(b) deferrals, though not of HSAs.

Does California pay make up for it?

Partly. Doximity's 2026 report puts every large California metro above the $438,269 national average for physician pay. The table compares each metro's average, after California taxes, with what a physician earning the national average keeps in Texas ($301,802).

Even Sacramento, the best-paid California metro, leaves its average physician $19,546 a year behind a national-average physician in Texas after tax, before housing costs. California's pay premium is real, but it is smaller than its tax premium for most physicians. The cases where California wins on money are specific: a high-paying Kaiser specialty, a strong retirement package, or a household tied to the state for other reasons. Our salary by state guide adds cost-of-living adjustments.

Five California tax rules that catch physicians

1. HSAs are taxable in California. California doesn't follow the federal HSA deduction, so payroll HSA contributions are added back to California income and the account's earnings are taxed by the state. A bill to conform from 2026 (AB 781) died in January 2026. The HSA is still worth funding for the federal deduction and FICA savings.
2. No 529 deduction. California is one of the states with an income tax that gives no deduction or credit for 529 contributions. Growth and qualified withdrawals are still tax-free, so a California family can pick any state's plan on fees and investments alone. Our 529 calculator projects the balance.
3. Capital gains are ordinary income. The FTB says plainly that California has no lower rate for capital gains, so selling a practice, a rental or a concentrated stock position can cost up to 13.3% on top of federal tax.
4. No bonus depreciation or real estate professional status. California hasn't conformed to federal bonus depreciation and keeps rentals passive even when you qualify as a real estate professional federally, so cost segregation saves far less state tax (real estate taxes guide).
5. Leaving doesn't end the state's claim. California taxes nonresidents on services performed in the state, so locums shifts here after a move still create a California return (1099 taxes guide). If you itemize, the federal SALT cap is $40,400 for 2026 but shrinks above $505,000 of income and is back to $10,000 by about $606,000 (2025 tax law guide).

Decision 1

Choosing an employer: UC, Kaiser or a private group

California's two giant structured employers sit at opposite ends of nearly every axis, and both punish uninformed early decisions. Everyone else works under the corporate-practice ban, which generally keeps private hospitals from employing physicians directly, so most non-UC, non-Kaiser physicians are employed by a medical group, a group contracted to a hospital-affiliated medical foundation, or their own practice.

What one year of service adds to retirement

The pension gap between UC and Kaiser comes down to which pay each plan counts. The table applies each plan's formula to three levels of pay. For UC, “pay” means your HSCP covered compensation, which for most clinicians is well below total pay, so the UC columns are a best case.

Twenty years at UC, retiring at 65 at the cap, produces a pension of about $79,887 a year. Twenty years at TPMG at or above $360,000 of pay produces about $144,000, in today's limits, and TPMG adds up to $26,775 a year of automatic employer contributions on top. UC's answer is flexibility rather than size: Savings Choice vests UC's 8% after one year and lets you switch into the pension at year five, and UC lets physicians fill both a 403(b) and a 457(b), $49,000 a year of deferrals in 2026, with a mega backdoor Roth option.

Both systems are back-loaded. Kaiser's pension and Plan 2 money and UC's Pension Choice money vest at five years, so a physician who leaves in year three keeps little but their own contributions. If you might leave within five years, that matters more than any number in the table. Read the UC guide, the Kaiser pension guide and the Kaiser salary guide, then compare against private offers with the employer guides hub and our pay benchmark.

Kaiser's two California groups are hard to compare on posted pay alone. SCPMG's primary care range ($412K–$432K) already includes incentives and sits above TPMG's base plus its full listed incentive ($375,900), while some physicians have reported the reverse for their own specialty. Compare like with like: base, incentives, retirement and the ownership step, in writing, for your specialty and site.

Decision 2

Side income and entities: the Professional Medical Corporation

The moment a California physician earns a 1099 dollar from clinical work (locums, telehealth, expert consulting, AI training work), the state's entity rules apply. Get this wrong and it isn't a tax inefficiency; it's a licensing problem.

• The only corporate form is the Professional Medical Corporation under the Moscone-Knox Act. At least 51% of shares must be owned by California-licensed physicians; up to 49% may be held by listed licensed professionals; no lay owners.
• A sole proprietorship is legal. The ban is on practicing through the wrong entity, not on practicing without one. Schedule C, quarterly estimates and a Solo 401(k) work fine.
• Formation is cheap; running it isn't free. State filings are about $125 (Form ARTS-PC plus the Statement of Information). Our PMC guide puts the carrying cost of a lean solo PMC at $2,000–$5,000 a year before California's S-corp tax of 1.5% of net income ($800 minimum).
• Branded practices need a Fictitious Name Permit from the Medical Board before the sign goes up.
• The PMC doesn't shield you from your own malpractice. It protects personal assets from the entity's contracts, leases and debts, and from co-owners' claims in a group.

The S-corp arithmetic in California

An employed attending whose W-2 already passes the $184,500 Social Security wage base saves only Medicare tax on S-corp distributions: 2.9%, or 3.8% with the Additional Medicare Tax. California then takes 1.5% of the S-corp's net income. So each $10,000 of distributions saves $290 to $380 of federal tax and costs $150 in California tax. To cover $2,000–$5,000 of carrying costs, the corporation needs roughly $87K to $357K of distributions on top of a reasonable salary, and below about $53K of net income the $800 minimum tax, not the 1.5%, applies.

That is why our PMC guide says to skip the entity for modest side income, calls $120,000–$150,000 of net 1099 income borderline, and recommends the PMC with an S election for full-time 1099 physicians, whose salary can sit below the wage base so Social Security savings join the math. Try your own numbers in the S-corp calculator, then subtract the California tax. For the broader picture, see locum tenens taxes, physician side income and DPC and concierge economics.

Decision 3

The 2026 legal picture: SB 351, non-competes and MICRA

Private equity and MSOs

California has written key corporate-practice principles into statute. SB 351, signed October 6, 2025 and effective January 1, 2026, bars private equity groups and hedge funds involved with a physician or dental practice from interfering with professional judgment, including hiring or firing clinicians based on clinical competency and making coding and billing decisions, and voids certain non-compete and non-disparagement clauses in their contracts. Companion legislation, AB 1415, requires management services organizations to give the state's Office of Health Care Affordability notice of their transactions.

• Evaluating a PE approach to your practice: the MSO and “friendly PC” structures those deals rely on now operate under statutory limits with an enforcement-minded Attorney General behind them. 2026 deals need 2026 counsel. See selling to private equity and why PE deals are slowing.
• Holding a medical directorship tied to an MSO: the clinical and non-clinical lines the law draws now have statutory force. See the medical director guide.
• Just practicing: the direction of travel is tighter entity enforcement, which makes a compliant structure at formation (Decision 2) more important, not less.

Non-competes

California voids contracts that restrain anyone from a lawful profession (Business and Professions Code § 16600). Since January 1, 2024, § 16600.5 also makes a void non-compete unenforceable in California wherever it was signed and lets employees sue an employer that tries to enforce one. The main exception is a sale: a physician who sells a practice or an ownership interest can agree not to compete (§ 16601), which matters at buy-out time. Our non-compete guide compares other states.

MICRA's rising damage caps

For almost 50 years, California capped non-economic damages in malpractice cases at $250,000. AB 35 replaced that in 2023 with caps that rise every January 1, and with separate caps for health care providers as a group, health care institutions as a group, and unaffiliated defendants. Economic damages are not capped.

The caps still hold premiums down. In the AMA's 2025 premium survey, Los Angeles and Orange counties had the lowest rates of the eight markets in our malpractice cost guide: $49,804 for an OB/GYN, $41,775 for a general surgeon and $8,274 for an internist, against $243,988 for an OB/GYN in Miami-Dade. The injury cap rises $40,000 a year, between 6% and 9% a year, through 2033, so watch your renewals; our tail coverage guide covers what leaving a claims-made policy costs.

Protection

Insurance and protecting what you have

Disability insurance sold in California is different

Several major carriers sell California physicians a different policy, or none, because of state rules on policy forms. Compare the California version, not the national one, when you shop.

California's own program is a floor, not a plan. SDI pays after a seven-day waiting period and covers pregnancy (typically up to four weeks before delivery and six weeks after, eight after a cesarean), followed by Paid Family Leave for bonding, but weekly benefits are capped far below a physician's pay. Our maternity leave guide shows how state, group and individual coverage stack, and own-occupation coverage explains the definition that matters most.

Asset protection and community property

• Homestead: California protects $300,000 to $600,000 of home equity, depending on the county median home price, with both figures adjusted for inflation each year since 2022 (Code of Civil Procedure § 704.730).
• IRAs: protected only to the extent a court finds necessary for your support in retirement (§ 704.115(e)), which is weaker than many states. Employer plans covered by ERISA keep federal protection, a reason to think before rolling a 401(k) into an IRA.
• No tenancy by the entirety: California doesn't recognize it, so married physicians can't use it to shield joint assets.
• Community property: earnings during marriage are community property, and a divorce requires an equal division of the community estate (Family Code § 2550), including the marital share of pensions and practice value.

See physician asset protection and the physician divorce guide.

Housing

Housing: jumbo loans and Prop 13

Two numbers shape a California physician's first home: the federal conforming loan limit, above which a loan is jumbo, and Prop 13, which sets property tax at 1% of the purchase price plus local voter-approved levies and lets the assessed value rise no more than 2% a year until the home sells. The table applies both to the median single-family home in the state's two largest metros.

A Bay Area median home puts even a 10%-down buyer into jumbo territory, which is where physician mortgages and conventional jumbo loans compete most directly. Kaiser's Northern California group offers new physicians an interest-free home loan of up to $250,000 for ten years in some 2026 postings, worth asking about in any TPMG offer. Prop 13 also means the tax you lock in at purchase follows you for as long as you own the home, which rewards buying once and staying. Run the loan comparison in the physician mortgage calculator and read how to buy a home as a physician.

Student loans

Student loans: PSLF and California's repayment programs

California's corporate-practice ban, a problem for entity planning, is a benefit for PSLF. Since July 1, 2023, a physician who contracts with a nonprofit or public hospital in a role state law bars it from filling with an employee can count that work (34 CFR 685.219). That covers many Kaiser physicians and many physicians in groups that contract with nonprofit hospitals. Certify every year, and use the hospital's EIN as our PSLF employer guide explains. UC is a public employer, so UC physicians qualify directly.

• CalHealthCares: up to $300,000 for five years with a 30%+ Medi-Cal caseload; suspended by the 2025-26 budget, with no new cohort moving forward.
• CA-SLRP: up to $50,000 (full-time, 2026) for two years at a site in a federal shortage area; the 2026 window closed September 15, and the next opens in July 2027.
• CMSP: for primary care in 35 mostly rural counties; not taking 2026-27 applications.
• Stacking with PSLF: allowed for CalHealthCares, but duplicative funds can be recouped if PSLF later forgives the same balance.

The details are in the CalHealthCares guide and the state programs guide; run the forgiveness math in the PSLF calculator or read PSLF vs. refinancing.

Checklist

The California physician checklist

1. Before forming anything for 1099 work, decide between sole proprietorship and a Professional Medical Corporation. Never practice through an LLC or an out-of-state PLLC.
2. If you form a PMC, file Form ARTS-PC (not ARTS-GS), adopt professional-corporation bylaws, file the Statement of Information within 90 days, register with the EDD for payroll, and get a Fictitious Name Permit for any brand name.
3. At a UC job, make the retirement election inside 90 days, ask in writing for your covered compensation and designated-faculty status, and submit CalPERS reciprocity forms if you have pre-2013 CalPERS service.
4. At Kaiser, make the 401(k), after-tax and (at SCPMG) Keogh elections in the first weeks; at TPMG, ask for the current share price and redemption terms well before year three.
5. Certify PSLF for every California hospital job, including contracted ones, and use the hospital's EIN where the contractor rule applies.
6. Budget for SDI on all wages ($6,500 at $500,000). With no wage cap, there is no excess-SDI refund for working two jobs.
7. Keep funding the HSA for its federal benefits, but expect California to tax the contributions and earnings.
8. Pick a 529 plan on fees and investments, since no plan earns a California deduction.
9. Buy disability insurance on the California policy form, and compare the California versions of each carrier's product.
10. Read your contract knowing non-competes are void, but check repayment terms on signing bonuses and forgivable loans, and expect an enforceable non-compete if you sell a practice or ownership stake.
11. Check MICRA's cap for the current year ($470,000 for injury in 2026) when you review malpractice limits and renewals.
12. Before selling a practice or a large investment, plan for California taxing the gain at ordinary rates, and for SB 351 if a private equity buyer is involved.
13. Before moving out, settle residency questions with a CPA; work you do in California after the move is still taxed here.

Directory

Every California guide on MedMoneyGuide

The five California guides first, then the national guides with California-specific sections, grouped by topic.

Calculators

• S-corp tax savings calculator: Test whether a PMC with an S election beats a sole proprietorship (subtract the 1.5% California tax yourself).
• PSLF calculator: Forgiveness vs. refinancing for your balance and income.
• Tax withholding calculator: Check withholding and estimated payments when side income is added to a W-2.
• Retirement savings calculator: Project UC, Kaiser or private-group retirement balances.
• Physician mortgage calculator: Physician loan vs. conventional for a California-priced home.
• Pay benchmark: Compare an offer with national averages for your specialty.
• Contract analyzer: Score an offer’s terms before you negotiate.
• 529 college savings calculator: Project college costs; California gives no state deduction for contributions.

Still to come: dedicated guides to California physician taxes, MICRA and malpractice in California, and California physician mortgages. New guides go out first in our monthly newsletter (sign up at the bottom of this page). Related hubs: physician employer guides, physician student loans and physician net worth benchmarks.

How we built this page

Methodology and sources

Every tax figure on this page is computed when the page is built by the same take-home model our calculator uses: 2026 federal brackets and standard deduction (IRS Rev. Proc. 2025-32), the $184,500 Social Security wage base, the Additional Medicare Tax, California's 2025 FTB rate schedules with the exemption credit phase-out and the Behavioral Health Services Tax, 1.3% SDI on all wages, and Washington's 2026 PFML and WA Cares premiums. Retirement figures apply the plan formulas documented in our UC and Kaiser guides to 2026 IRS and PEPRA limits. MICRA caps are computed from the statute's schedule; housing figures apply FHFA limits and Prop 13's rules to NAR's Q2 2026 medians. Kaiser pay comes from 2025–2026 job postings collected in our Kaiser salary guide; metro pay from Doximity's 2026 report. Physician-reported Kaiser figures (buy-in, partner terms) are not official and are labeled as such.

• 2025 California Tax Rate Schedules and 2025 Form 540 booklet (Behavioral Health Services Tax), Franchise Tax Board. Accessed October 21, 2026.
• Rates and Withholding (2026 SDI rate, no wage limit), Employment Development Department. Accessed October 21, 2026.
• Capital gains and losses, Franchise Tax Board. Accessed October 21, 2026.
• AB 781 bill analysis (HSA nonconformity under current law), Franchise Tax Board; bill status from California Legislative Information. Accessed October 21, 2026.
• Tax benefits of California 529 plans, Savingforcollege.com. Accessed October 21, 2026.
• California Corporations Code § 17701.04, California Legislative Information. Accessed October 21, 2026.
• UC Retirement Choice (UCRP 2016 Tier), UCnet, University of California. Accessed October 21, 2026.
• COLA increases for dollar limitations on benefits and contributions ($360,000 compensation limit and $72,000 defined contribution limit for 2026), Internal Revenue Service. Accessed October 21, 2026.
• SB 351 (2025) and AB 1415 (2025), California Legislative Information. Accessed October 21, 2026.
• Business and Professions Code § 16600 and § 16601, California Legislative Information; § 16600.5 (SB 699, 2023) as summarized by Goodwin. Accessed October 21, 2026.
• Civil Code § 3333.2, California Legislative Information, and Milliman, How will AB 35 affect MICRA. Accessed October 21, 2026.
• 34 CFR § 685.219, Public Service Loan Forgiveness, eCFR. Accessed October 21, 2026.
• CalHealthCares, Physicians for a Healthy California; DHCS FY 2025-26 Budget Act Highlights; California State Loan Repayment Program, HCAI. Accessed October 21, 2026.
• California Property Tax: An Overview (Publication 29), State Board of Equalization. Accessed October 21, 2026.
• FHFA Announces Conforming Loan Limit Values for 2026, Federal Housing Finance Agency. Accessed October 21, 2026.
• Metro home prices, Q2 2026, National Association of Realtors. Accessed October 21, 2026.
• Doximity Physician Compensation Report 2026 (metro and specialty averages). Accessed October 21, 2026.
• Disability Insurance: pregnancy FAQs and eligibility FAQs, Employment Development Department. Accessed October 21, 2026.

Kaiser job postings, Permanente plan documents, physician forum reports, the AMA premium survey and the carrier documents behind the disability table are cited in full in the guides linked above.

Changes

Update log

• October 21, 2026: Rebuilt the hub. Added computed take-home tables for California, Texas and Washington (single and joint), a metro pay-after-tax comparison, a UC vs. Kaiser vs. private employer comparison with per-year retirement accruals, the S-corp break-even arithmetic, the MICRA cap schedule through 2033, California disability policy differences, a housing table (jumbo thresholds and Prop 13), a decision path, a 13-step checklist and a directory of 37 guides and 8 calculators. Corrected the CalHealthCares entry to show that the program is suspended, noted that current SCPMG postings say no buy-in is required, and corrected the newsletter frequency to monthly.
• September 27, 2026: Sources rechecked.
• August 2, 2026: Hub published.