Many Canadian doctors assume there’s not much they can do about their tax bill—but that’s simply not true. The key? Understanding how your income is taxed and how to plan around it.
Here’s what you need to know:
- Tax Brackets: Only the Marginal Income Counts
One of the biggest misconceptions is that earning more pushes all of your income into a higher tax rate. In reality, only the income above each threshold is taxed at the higher rate. That means your marginal rate may be 50%+, but your average rate is lower.
- Incorporation: Not Always the Golden Ticket
Incorporation is often promoted as a must for doctors—but it only works when you’re leaving income in the corporation or using it to invest. If you’re withdrawing everything, the benefits are limited. MedTax helps assess if incorporation actually fits your lifestyle and income needs.
- Income Splitting: Legal, but Complicated
While some tax advisors still suggest paying family members, the CRA’s TOSI rules make this risky without proper planning. Payments must be reasonable, and family must actually contribute to the business. We structure it to keep you compliant and tax-efficient.
- RRSPs, IPPs, and TFSAs: Use the Right Mix
RRSPs are great for short-term deductions. PPPs can offer bigger retirement contributions (especially if you’re over 40 and incorporated). TFSAs, while not deductible, are ideal for long-term, tax-free growth. At MedTax, we blend these tools for maximum effect.
- Strategic Timing Can Lower Your Bracket
Income smoothing—like deferring billings or accelerating expenses—can help you stay in a lower bracket. It’s not just about what you earn, but when you earn it.
Your Planning Should Start Now
There’s no one-size-fits-all tax solution for doctors. But with the right strategy, you can legally lower your taxable income and keep more of what you earn.
Book a consultation with MedTax today and let’s build a plan that fits your life—not just your numbers.
