As we look ahead to the 2026 tax year, income splitting remains a relevant and strategic way for physicians to reduce household tax burdens — even with tightened rules from the CRA in recent years. While the Tax on Split Income (TOSI) introduced in 2018 placed significant limits on income splitting, certain opportunities are still available and effective for physicians and their spouses when implemented correctly.
Here’s how doctors in Canada (outside of Quebec) can continue to benefit from income splitting strategies through spousal payments.
- Paying a Spouse for Actual Work in the Practice
If your spouse works in your medical practice — whether in administration, bookkeeping, or patient communication — compensating them with a reasonable salary remains a compliant and effective income splitting method. The salary must reflect the market value for the work performed and be supported by documentation (e.g., timesheets, job descriptions, payroll records).
Why it still works: This method stands up to CRA scrutiny because it’s rooted in real labour and fair compensation, not passive income.
- Spousal Loans at Prescribed Rates
With prescribed interest rates still relatively low in Canada, spousal loan strategies continue to be a tax-efficient method to shift investment income to a lower-income spouse. You can lend funds to your spouse at the CRA’s prescribed rate (e.g., 5% in 2025), allowing them to invest and earn returns taxed at their lower marginal rate — as long as interest is paid annually by January 30 of the following year.
Pro Tip: Ensure the loan is formalized with a written agreement, and interest is paid on time to avoid attribution rules.
- Use of a Family Trust (with Caution)
Family trusts are still viable in some cases, especially for doctors who own incorporated practices. While TOSI has limited many distributions to adult family members, trusts can still be useful when structured correctly — particularly when adult children or spouses are actively involved in the business or when income is derived from excluded business activities.
Caution: Trust arrangements must be carefully designed to ensure compliance and avoid triggering TOSI.
- Contribute to a Spousal RRSP
Spousal RRSPs allow the higher-income spouse to contribute to an RRSP in the name of the lower-income spouse. The contributor gets the tax deduction, and the spouse pays tax on withdrawals in retirement — typically at a lower rate. This remains an effective long-term income-splitting strategy.
- Use of the Pension Income Splitting Rule (Age 65+)
For physicians or their spouses over 65, pension income splitting allows up to 50% of eligible pension income to be transferred to a lower-income spouse on the tax return, potentially reducing the couple’s combined tax bill. This includes income from RRIFs and other qualifying sources.
Moving Forward with Smarter Tax Planning
Income splitting isn’t what it used to be — but for physicians, there are still practical and compliant ways to ease the overall tax load across your household. Whether it’s structuring reasonable spousal compensation, setting up prescribed rate loans, or using a spousal RRSP to your advantage, each strategy requires thoughtful planning and ongoing compliance.
Understanding what’s allowed (and what isn’t) is key. That’s where expert guidance makes all the difference.
Ready to explore the income-splitting strategies that still work in 2026?
Start the conversation with a MedTax tax advisor today. We’ll help you navigate the rules with confidence and clarity.
