As the end of the year approaches, it’s not just the holiday rush that deserves your attention — it’s also prime time to take a closer look at your corporation’s financial health. For incorporated physicians in Ontario, the final quarter of the year offers strategic opportunities to optimize your tax position and set the stage for a stronger financial future.
Here are the top year-end tax planning moves to consider before the clock strikes midnight on December 31st.
- Pay Yourself Wisely: Salary vs. Dividends
If you’re incorporated, one of the biggest year-end decisions is how to compensate yourself. Salary and dividends come with different tax implications — and the right balance can significantly affect both your personal and corporate tax bills.
- Salary is deductible for the corporation and contributes to your RRSP room.
- Dividends are taxed at lower personal rates and don’t create RRSP contribution room.
A blended approach may help you meet short-term cash needs while minimizing your overall tax burden. Your accountant can help crunch the numbers — ideally before year-end.
- Max Out RRSP and TFSA Contributions
Even though RRSP contributions can be made up until 60 days into the new year, maximizing contributions before year-end — especially if you’ve paid yourself a salary — can help reduce your personal taxable income now.
- RRSPs lower your current tax bill and grow tax-deferred.
- TFSAs are a great tool for pulling funds out of the corporation tax-free (via dividends), then investing them in your personal name with no future tax on growth or withdrawals.
Tip: Make sure you’ve declared enough salary this year to build RRSP room for next year!
- Use the $500,000 Small Business Deduction Strategically
Your corporation may qualify for the federal small business deduction (SBD), which provides a lower tax rate on the first $500,000 of active business income. However, passive investment income (e.g., from a corporate investment portfolio) can reduce your access to this lower rate.
If you’re getting close to the $50,000 passive income threshold, it’s worth reviewing your corporate investments before year-end to assess potential impacts — and whether an alternative strategy (like an Individual Pension Plan or Corporate Class investments) may help preserve your SBD.
- Defer Income, Accelerate Expenses
Classic year-end tax strategy: Push income into next year, pull expenses into this year.
For incorporated physicians, this could mean:
- Deferring billing if possible (within reason and ethics).
- Prepaying for business-related expenses (e.g., medical supplies, software, insurance, professional dues).
- Investing in capital equipment and claiming depreciation using Capital Cost Allowance (CCA).
Not only does this reduce your corporate taxable income, but it may also open the door to cash flow benefits in early 2026.
- Review Shareholder Loans & Draws
Have you taken funds from the corporation during the year that weren’t salary or dividends? Make sure these are properly recorded and repaid (or declared as income) before year-end to avoid unwanted tax consequences.
Pro Tip: A Shareholder Loan Account that isn’t repaid by the end of the following fiscal year could be taxed as personal income.
- Consider a Corporate Donation
Charitable giving through your corporation isn’t just good karma — it’s also tax-smart. Your medical professional corporation can claim a tax credit for eligible donations, reducing its taxable income. Just make sure the donation is made by December 31st.
- Plan for Family Involvement
If your spouse or adult children are involved in the practice or assist with administrative duties, explore whether reasonable compensation is an option. You’ll need to comply with Tax on Split Income (TOSI) rules, but in some cases, family income-splitting can help reduce your household’s overall tax burden.
- Set a Date with Your Accountant (Soon)
The best year-end tax strategies are proactive, not reactive. Now’s the time to book a check-in with your medical tax advisor — before they’re buried in tax season.
Final Thoughts
Tax planning for incorporated physicians isn’t one-size-fits-all — especially in Ontario, where provincial rules and federal changes continue to evolve. Taking the time now to review your corporate structure, income strategy, and investment plans can yield major savings come tax season.
Visit MedTax to discover how we can help you finish the year strong — and start the next one even stronger.
