Tax Deductions & Credits for Residents
As a physician, the tax you will pay over the course of your professional career will be the largest expense you have. As a medical resident, it is helpful to ensure that you are starting off your career aware of all tax credits and deductions available to you in order to minimize your tax expense. While we recommend that you speak with your financial advisor to ensure that you are considering all options available, we have also compiled a list of common expenses that you may be eligible to claim on your 2020 Tax Return. Visit us at www.medtax.ca to learn more about the credits and deductions available to you!
Tuition Tax Credit
Any tuition related fees paid during residency may qualify for the non-refundable tuition tax credit. This could include, but is not limited to, admission and enrollment fees, fees for use of facilities, and exam registration fees. Any unused tuition tax credits are automatically carried forward, or can be transferred to an eligible person. You will receive a T2202 annually that outlines any relevant costs paid in that year that will qualify for the credit.
Student Loans Interest
If you have an existing student loan that had an outstanding balance as of 2020, you may be eligible for a 15% federal non-refundable tax credit on any interest you paid during that year. If you are eligible, you will receive a letter from the loan administrator stating the amount of interest paid in the year to be included on your tax return. It is important to note that in response to Covid, the Government of Canada paused the repayment schedule from March 30-September 30 of 2020, so no interest was incurred during this time.
Residents are often required to relocate closer to their place of residency, in order to meet the demands for long shifts, on-calls, and emergency situations. As a result, they may also be eligible to claim their associated moving expenses. These expenses can include transportation, travel expenses, packing and shipping, storage, temporary living expenses, as well as expenses related to buying/selling a home, such as legal fees, commissions, land transfer tax, and registration fees.
While you are not eligible to deduct the cost of commuting to your regular place of employment, you can still deduct transportation costs for travel to and from a temporary work location- such as a different hospital, professional conventions, housecalls, and meetings. You may also be able to deduct the portion of your vehicle expenses that directly relate to use for employment purposes, such as maintenance and repairs, insurance, lease payments, and interest on a loan. You can also expense public transportation such as taxis, Ubers, public transit passes, and parking fees.
Home Office Expenses
In response to the current pandemic, we saw an increase in doctors working from home when able. If you worked from home for over 50% of the time, over a period of 4 or more consecutive weeks, you may be eligible to claim any expenses related to your home office. You may also be eligible to claim home office expenses if you regularly work from home (charting, scheduling, billings, etc.).
Union, Professional & Membership Dues
Union dues, as well as any additional dues paid to medical associations that require a membership in order to practice in your province/territory, are deductible.
First-time Homebuyers’ Credit
If you purchased your first home during the last tax year, you may be eligible to receive the First Time Home Buyers’ Credit. This government incentive was put in place to help homebuyers ease the financial burden of purchasing their first home. The Home Buyers’ Amount offers a $5,000 non-refundable income tax credit amount on a qualifying home acquired during the year. For an eligible individual, the credit will provide up to $750 in federal tax relief. To be able to claim this amount, you must not have owned or lived in another home owned by you or your partner, during the past 4 calendar years. You, or an immediate family member, must also move into the residence within one year of purchase.
If you have a child that is in daycare or is looked after by caregivers or babysitters, you are eligible to deduct this expense by $8,000 a year for any child under the age of 7, and $5,000 a year for any child over 7, up to age 16.