Incorporation of your professional services allows you to re-arrange your affairs such that you reduce your overall tax burden.
In general, incorporating your medical professional services is beneficial if you don’t require all your income to maintain your lifestyle. The main advantages of incorporation are the ability to defer taxes as well as accumulate capital within your Professional Corporation.
Your corporation is taxed at a rate of 12.2% on the first $500,000 of active business income, versus your current marginal tax rate of 53.53% (the highest Ontario marginal tax rate for personal income as of 2021).
In addition to a lower tax rate, incorporation allows for:
- Utilizing corporate dollars to fund corporately owned life insurance.
- Retaining after-tax earnings in the corporation.
- Retirement planning.
- Income-splitting opportunities.
- Flexibility in how you remunerate yourself.
- Utilizing the lifetime capital gains exemption on the sale of shares in your Professional Corporation, if applicable.
As an incorporated medical professional, you have excellent tax and estate planning opportunities that non-incorporated medical professionals do not.
The above material is for informational purposes only and should not be construed as legal or tax advice in any manner whatsoever. Every effort has been made to ensure its accuracy, but errors and omissions are possible. Professionals interested in exploring the incorporation of their medical practice should consult with experienced corporate law and tax professionals to discuss their specific needs and circumstances.
I have been working with Mark Levine and his team at Integrated Financial Strategies since 2009. He is extremely approachable, knowledgeable and reliable. At the end of medical school, he was able to guide me and provide advice with regards to various insurance products. He deals with many physicians and as a physician was able to steer me in the right direction. He doesn’t recommend products that aren’t right for you based on your current situation. I look forward to continuing to work with Mark.