Moonlighting Tips for Officers in Navy Medicine
Someone who donated some money in support of the blog requested a post addressing moonlighting. Here are some questions they had or issues they raised plus a few more:
Should You Moonlight?
Moonlighting is not required to advance your career in the Navy. I barely moonlighted. Moonlighting is optional.
For many specialties and locations, moonlighting is essential to maintain the full scope of your skills. If you need it for case complexity or volume, that is certainly a valid reason to do it.
The extra money doesn’t hurt either, but you need to make sure that you do not become dependent on the moonlighting income. For example, during COVID the Surgeon General prohibited all moonlighting. You can also lose the ability to moonlight due to a deployment or permanent change of station (PCS). If you are dependent on that extra money, now you have a real financial problem. Make sure moonlighting income is extra and you are not dependent on it.
Get Approved First
Everyone who is active duty needs to get approval from their command before they engage in moonlighting. There may be ways to do it without command approval, like when you are on leave, but I would still recommend you run this by a legal officer before you do it.
The safe bet is to just get approval before you do it.
Should You Set Up an LLC?
Many people think that if they moonlight they should set up a Limited Liability Corporation (LLC) to get extra protection against malpractice judgements. There may be reasons to set up an LLC, but protection from malpractice liability is not one of them. You cannot shield yourself from malpractice liability with an LLC.
If you are going to setup an LLC or some other corporate structure like an S Corporation (S Corp), it would be for tax or financial purposes, not to limit malpractice liability.
Do you need an LLC? No. If you moonlight as an employee, you are employed by that employer and your income is handled like any other employed income. If you moonlight as an independent contractor without an LLC, the IRS considers you to be a “sole proprietor” and your income just flows to your personal income tax return. This is how a single person LLC works too. It is what they call a “disregarded entity” and your income just flows through to your personal income tax return.
If you have consistent income from moonlighting, you could form an S Corp for tax reasons. All of these issues are best summarized in this White Coat Investor article. I’d check it out for a complete explanation.
The bottom line is that most people who moonlight probably will not form an LLC or other type of corporation. They will either be an employee or a sole proprietor.
SEP IRA vs Solo/Individual 401K
If you choose to moonlight, you can do so as an employee or as an independent contractor. Most people are tempted to do it as an employee because it seems like the easy button. Your employer will take care of withholding taxes on any income you make. If the employer offers a 401K, you may be able to use it.
If you moonlight as an independent contractor, you will have to make sure your taxes are properly withheld, usually by submitting quarterly taxes. This is a little bit of a pain, but you or your accountant can easily take care of this.
The real reason to consider moonlighting as an independent contractor is because you are eligible to open up an additional retirement account. As I mentioned above, if you are an employee you can probably use your employer’s 401K, but it doesn’t get you any additional retirement account space. In 2026, you would be limited to $24,500 total (assuming you are < 50 years old) between your Thrift Savings Plan (TSP) and your employer’s 401K. You can’t contribute the $24,500 limit twice.
If you are an independent contractor, you can open up a SEP IRA or solo/individual 401K. These accounts come with additional retirement contribution space in addition to the $24,500 limit you’d have in your TSP. In other words, moonlighting as an independent contractor allows you to have additional tax protected space to invest in.
Should you open a SEP IRA or a solo/individual 401K? The details are spelled out in this White Coat Investor post, but the bottom line is that you should probably set up a solo/individual 401K instead of a SEP IRA. A SEP IRA can mess up your backdoor Roth IRA and a solo/individual 401K allows you to put a little more away than a SEP IRA does.
Where do you open a solo/individual 401K? We used to have one at Vanguard, but they got out of that business and transferred the account to Acensus, which has worked out fine for us. I have no experience with any other providers.
Do You Need Tail Insurance and Who’s Paying For It?
If you are moonlighting, you will likely need malpractice insurance. There are two types of malpractice insurance, occurrence and claims made.
If you have occurrence malpractice insurance, you are covered even after you leave that moonlighting gig. If you have claims-made malpractice insurance, you are no longer covered after you leave that employer and will need what they call tail insurance in order to ensure you remain covered. Tail insurance can be expensive. In fact, you may find it costs more than the entire sum you made moonlighting!
If you are going to moonlight, make sure you find out ahead of time if you will need a tail and who is paying for it (you vs the employer). If you are going to be paying for it, try to find out approximately how much it will cost. You don’t want to moonlight for an extra $30K only to find out your tail insurance will cost more than that!
The Bottom Line
Moonlighting is optional, but make sure to get command approval first. You probably won’t set up an LLC and will start as a sole proprietor, only considering a corporation if your income is steady and significant. Make sure you know if you need tail coverage and who is going to pay for it.