Tax Strategies for Physicians in Canada

Are you a physician or medical doctor who ncludings tired of getting beat down by the taxman? In this article, we will share 4 unique tax saving strategies for medical doctors in Canada.

Corporate Life Insurance

What can Corporate Life Insurance do for doctors?

• It can shelter taxes on investments
• Create pension income for retirement
• Provide a virtually tax free cash payout to your family members upon your/ after death 

How can these above objectives be accomplished with a corporate life insurance policy?

1. Investments made inside a corporate life insurance policy are not subject to income tax
2. Dividends can be paid from the policy to you as the primary shareholder upon retirement
3. Since the corporation is a beneficiary of the policy, any proceeds it receives from the insurance company can be paid tax free through the corporations capital dividend account to your estate

Meals and Entertainment Expenses for Medical Doctors

The Income Tax Act allows for a deduction of 50% of meals and entertainment expenditures from professional or business income. This includes:

• Meals with colleagues to review treatment techniques
• Meals purchased by a doctor for their interns
• Occasional entertainment expenses with partners

Vehicle Expenses for Physicians

By driving from one workplace to another, physicians can claim a portion of their vehicle costs, including:

• Fuel and oil
• Repairs
• Parking
• Toll changes
• Insurance
• Lease payments
• Depreciation on the cost of the vehicle 

The portion of the above costs is determined by the percentage that you drive your vehicle for business purposes to commute from one workplace to another, compared to the total kilometers you drove in a year. For example: if your business related driving is 5,000 km in a year and you drove a total of 20,000 km in the year, then the business portion represents 25%.

Eligible business related driving includes the following:

• Traveling from one workplace to another
• Visiting patients
• Traveling for a business meeting

Income Splitting with a Spouse

Make your spouse a non-voting shareholder of your professional corporation so that he or she can receive dividends from your corporation. This is particularly helpful if your spouse is in a lower tax bracket than you.

For more information on income splitting strategies, see our blog “Income Splitting in Canada”

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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