As a general rule, you can deduct from income any expense incurred to earn income. There are obviously some exceptions and limitations to this but if you keep that rule in mind it will greatly help you in knowing if an expense is deductible for tax purposes. Always consult your tax advisor to confirm if specific amounts are deductible.
Below are some industry specific deductions that you can likely claim on your tax return depending on your unique circumstances.
As a member of various professional organizations you pay annual fees/insurance for the privilege of practicing medicine in Ontario and other provinces. These amounts are 100% tax deductible in the year paid and include:
- PD courses
- Research journal subscriptions
- CMPA insurance premiums
- CPSO/OMA/RCPSO/etc annual dues.
You can deduct expenses while away from home in the course of work related travel. These would include expenses to participate in a conference or to temporarily relocate for work (ie locum).
Specific expenses you can deduct while travelling are:
- airfare/vehicle expenses incurred.
- hotel/lodging expenses.
- Cost of meals/groceries while out of town.
- Entertainment expenses paid related to meals with colleagues.
- Cost of the conference.
- Taxis/Ride sharing.
Home Office Expenses
If you don’t have an office in your clinic/hospital and you work from home regularly then you can deduct a percentage of your home expenses incurred in the year. The percentage is generally calculated based on the amount of space in your home used for the home office and is based on square footage or number of rooms. You should discuss this with your accountant to make sure you are claiming the full amount available to you annually.
Specific expenses you can deduct for home office are:
- Mortgage interest.
- Property Maintenance/Repairs.
- Condo Fees.
Vehicle expenses are limited to amounts related to earning business income. This includes driving to a house call, between clinics on a given day, to a local conference, to meet your accountant/adviser, to do business banking, etc. It does not include kilometers to drive to and from the clinic/hospital as those amounts are considered personal in nature. Consult your accountant to determine if you qualify for this deduction.
Specific expense you can deduct for vehicle are:
- Lease payment.
- Interest on loan payment.
- Toll charges.
You can deduct supplies and tools used directly in your work including:
- scrubs and lab attire,
- office supplies,
- medical supplies and medical tools (i.e. stethoscope)
- Cell phone
- Office furniture
- Gifts to staff and colleagues
- Billing agent fees
- Locum fees paid
- Office rent/shared clinic overhead
- Health insurance premiums
- Meals and entertainment to take out staff and colleagues
Incorporate an MPC
You should consider the tax savings as a self employed vs. incorporated physician. The vast majority of physicians will benefit from incorporating their practice. The primary benefits of incorporation include:
- tax savings from income splitting
- tax deferral from retaining and investing income and
- the flexibility to accelerate or defer income reported on your personal tax return.