Many doctors and healthcare practitioners see the value in forming a medical corporation but don’t want to feel drowned in paperwork. In Canada, tax rates for individual doctors are much higher compared to tax rates for a medical corporation. When doctors take some time to understand the benefits of incorporating a medical practice, it often leads to significant tax advantages and increased savings. The IFMS team works with healthcare professionals to better understand if the incorporation decision is right for you.
Most of the benefits of incorporating are related to tax savings so working with an experienced accountant or tax expert can save you more time and money. When your medical practice is incorporated, the income from your practice is taxed at approximately 12% as active business income compared to 28% as the general corporate tax rate.
Doctors are also able to increase their savings quicker by incorporating their practice by allowing the tax savings money to grow tax-deferred. This is a savings strategy if you want to increase your savings more than your RRSP accounts would allow. Most medical practitioners are looking to incorporate their practice and our team helps with the following:
Another benefit of incorporating a medical practice is using income splitting with family members in a lower tax bracket. This rule is known as Tax on Split Income (TOSI) and is constantly changing and our tax experts can summarize how these changes would affect your practice and family. We will walk you through the income-splitting rules and exceptions available to some physicians.
Is This Right For Me?
If you’re trying to figure out if incorporating your medical practice is right for you, consider scheduling a consultation with one of our experts. We help you integrate the corporation into your financial plan. Whether you are new in practice and want more information, planning for retirement, or strategizing on building wealth and eliminating debt – our team is here for you.