When physicians accept a new role, a signing bonus can feel like a straightforward win. But in many employment contracts, what appears to be a bonus may actually be structured as a forgivable loan, and that distinction can create hidden tax surprises if you're not prepared.
The issue is not just how much money is offered, but how the payment is structured, when it becomes taxable, and what happens if you leave the position before the forgiveness period ends. For new attendings and established physicians changing jobs, understanding these details before signing can help avoid an unexpected tax bill later.
Keep reading or watch the video below to learn more about the "hidden" tax surprise associated with physician signing bonuses, which are considered forgivable loans.
A physician signing bonus is an incentive offered by a hospital, health system, private practice, or healthcare group as part of an employment offer.
These bonuses can be significant. According to AMN Healthcare’s 2025 Review of Physician and Advanced Practitioner Recruiting Incentives, the average physician signing bonus was $38,215.
While the amount matters, the structure matters just as much. Some signing bonuses are paid as traditional taxable compensation, while others are structured as forgivable loans, which can create different tax timing and repayment considerations.
A forgivable loan is money provided up front that does not have to be repaid if certain conditions are met.
In a physician employment contract, the typical condition is staying with the employer for a specific period. If the physician completes the required employment period, the loan is forgiven. If the physician leaves early, the contract may require repayment of some or all of the loan.
Here is a simplified example:
A physician receives a $30,000 signing bonus when accepting a new role. The contract states that the payment is structured as a forgivable loan and will be forgiven after the physician remains employed for two years. If the physician completes the required employment period, the loan does not have to be repaid.
That may sound simple, but the tax timing can be easy to overlook.
Yes, physician signing bonuses are generally taxable, but the timing depends on how the bonus is structured.
If the signing bonus is paid as regular compensation, it may be treated as taxable income when it's paid. If it's structured as a forgivable loan, the tax liability may arise later, when the loan is forgiven.
In general, the IRS states that canceled, forgiven, or discharged debt may be taxable and must be reported in the year the cancellation occurs, unless an exception applies.
For physicians, this can create a timing mismatch: you may receive the money upfront, but the taxable income may appear in a later year when the loan is forgiven.
The hidden tax surprise is not always the amount of the signing bonus. It's when the tax bill shows up.
For example, a physician may receive a $30,000 signing bonus when starting a new position. If that payment is structured as a forgivable loan, the physician may not owe tax on the full amount in the year the money is received. Instead, the taxable event may occur later, when the loan is forgiven, depending on the terms of the agreement.
That can be a problem if the bonus has already been spent on relocation, applied toward student loans, used for a home purchase, or absorbed into everyday cash flow.
This is why physicians should understand the structure of the signing bonus before assuming the full amount is available to spend.
Forgivable loans also carry repayment risk.
If a physician leaves the employer before the forgiveness period is complete, the contract may require repayment of part or all of the remaining loan balance. Depending on the agreement, repayment may be due immediately. In some cases, interest, penalties, or other clawback provisions may apply.
Before accepting a signing bonus structured as a forgivable loan, physicians should review:
A large signing bonus can be attractive, but restrictive repayment terms may limit flexibility if the role, compensation model, call schedule, leadership structure, or work environment does not meet expectations.
| Traditional Signing Bonus | Forgivable Loan |
| Usually taxable when paid | May become taxable later |
| No repayment obligation | Repayment may apply |
| Simpler tax planning | More complex tax timing |
| Greater flexibility | Employment commitment attached |
Tax treatment is important, but it is not the only consideration. A signing bonus should be evaluated in the context of the full employment offer.
Physicians should consider how the signing bonus interacts with:
Relocation assistance deserves special attention. Some physicians may assume that moving reimbursements are tax-free, but current IRS guidance generally treats moving expense reimbursements as taxable for most employees, with limited exceptions for certain Armed Forces members and certain intelligence community employees.
Because the tax treatment of compensation, bonuses, relocation assistance, and loan forgiveness can vary based on the specific agreement, physicians should coordinate with qualified tax and legal professionals before signing.
To avoid being caught off guard by the tax implications of a physician signing bonus, consider the following steps:
Do not focus solely on the dollar amount. Look for language that describes the payment as a loan, an advance, a forgivable loan, or a repayment obligation.
Clarify whether the loan is forgiven in full or in installments. For example, a two-year agreement may forgive the loan in full at the end of the second year, or it may forgive a portion each year.
Ask whether repayment is prorated, whether interest applies, and how quickly repayment would be required if you leave before the forgiveness period ends.
A CPA can help estimate the tax impact. An attorney can review the employment contract language. A financial planner can help evaluate how the signing bonus fits into your broader cash flow, savings, and debt, as well as your long-term planning decisions.
If the tax liability may occur later, it may be helpful to reserve a portion of the bonus rather than spending or allocating the full amount immediately.
A signing bonus is only one part of the offer. In some cases, a higher base salary, a different bonus structure, relocation assistance, or other compensation arrangements may be more valuable than a large upfront payment with restrictive repayment terms.
Physician signing bonuses can be valuable, but how they are structured matters.
If a signing bonus is actually a forgivable loan, it may create a future tax liability and repayment obligation that is easy to overlook during contract negotiations. Before accepting an offer, physicians should understand when the bonus becomes taxable, what happens if they leave early, and how the payment fits into their broader financial picture.
A signing bonus should not be evaluated by the headline number alone. The real value depends on its structure, timing, tax treatment, and flexibility.
Yes, physician signing bonuses are generally taxable. If the bonus is structured as traditional compensation, it may be taxable when paid. If it is structured as a forgivable loan, the taxable income may arise later when the loan is forgiven, depending on the contract terms.
A forgivable loan is an upfront payment that does not have to be repaid if the physician meets certain employment requirements. For example, a physician may receive a signing bonus that is forgiven after remaining with the employer for two or three years.
A forgivable loan can create a tax surprise because the physician may receive the money up front but owe taxes later when the loan is forgiven. If the bonus has already been spent, the tax bill can feel unexpected.
If a physician leaves before the forgiveness period ends, the employer may require repayment of some or all of the remaining balance. The contract may also include interest, penalties, or immediate repayment terms.
According to AMN Healthcare’s 2025 Review of Physician and Advanced Practitioner Recruiting Incentives, the average physician signing bonus was $38,215.
In some cases, yes. Physicians may want to ask whether the employer will consider alternative structures, such as taxable compensation, a different repayment schedule, relocation support, or another form of compensation. The best option depends on the physician’s contract, tax situation, and broader financial plan.
The headline number is only part of the decision. Our team helps physicians understand how compensation, taxes, cash flow, benefits, and long-term goals fit into a broader financial plan.
Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate.
CRN202905-11244523
Shane Tenny, CFP®, is Managing Partner of Spaugh Dameron Tenny, where he helps high-net-worth individuals and families navigate complex financial decisions with clarity, structure, and confidence. Since joining the firm in 2000, Shane has worked with clients through major financial transitions, including career changes, liquidity events, retirement, and multigenerational planning. His approach combines comprehensive financial planning with a focus on behavioral finance, including advanced studies in Behavioral Economics through the University of Chicago Booth School of Business. Shane is the author of Your Next Million, former host of the Prosperous Doc® Podcast, and a nationally recognized financial advisor, speaker, and educator.
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