We all can agree to one thing: all physicians have very big expenses looming on their heads, i.e., the income tax, eating up at least 35% of their incomes. Struggling between earning a decent livelihood, attracting enough customers, and being able to save simultaneously, a lot of practitioners often try to find ways to save on taxes as well.
This blog can become a succinct guide, or you can also get in touch with a small business bookkeeper who would be able to account for the expenses that can give you a tax rebate or tax deduction.
Union and/ or professional fee
All doctors and physicians are associated with medical organizations and pay annually to stay a part of it. Oftentimes, these association memberships are required to be able to practice within a province or a territory. All such union dues are normally deductible, and you can submit an official receipt with your tax return to claim the rebate/tax cut.
If you run your own facility, then you may deduct this as your business expense, shrinking the profit and thus giving you a lower amount of profit and thus a lower profit on tax.
Your meal and entertainment expense
Did you know that as a physician in Canada, you can actually have the amount spent on meals and entertainment deducted from your income? Up to 50% of the amount spent on entertainment and/ or food can be deducted from your income, thereby reducing it and decreasing the progressive tax charged on it. How can you have this done? Small business accounting service providers can help you prepare your accounts that make arrangements for your meal and entertainment expenses. The meals also include meals purchased for interns and the money spent on meals purchased when reviewing treatment techniques.
Deduct moving/ travel expense
If you moved at least 25 miles last year to be closer to your new location, you might be able to deduct the allowable relocation costs from your earning income at the new location.
If you have eligible moving expenses that can’t be deducted in the current year because you haven’t earned enough income, you may be able to carry them over and apply them to your income in another tax year. Keep your receipts in case your CRA requests them. Your small business accounting officer can help you account for these expenses.
You can deduct the following:
- Travel expenses, meals during the trip, and accommodation for a reasonable period of waiting for a new residence (usually within 15 days) also are tax-deductible.
- Costs of selling the former residence, including advertising, notary or legal fees, real estate commissions, and mortgage penalties (i.e., if the loan was repaid before maturity)
- All taxes paid for the transfer or registration of ownership in the new residence (excluding any value-added tax on goods and services), together with the legal fees associated with the purchase of a new residence if you or your spouse or partner sold your old residence
- the cost of connecting and disconnecting utilities and reviewing documents to reflect your change of address
- mortgage interest, property taxes, insurance premiums, and service costs (up to a maximum of $5,000) paid on your old unoccupied residence if you failed to sell it, provided you have made all reasonable efforts to sell it
Get a corporate life insurance
Insurance sounds like spending more money rather than saving? Life insurances can help you with tax rebates or even with tax reductions. You can create a pension on income, which is also deductible before the entire tax is charged.
Note: It is a literal tax-free payout to the family in the event of accidental death.
Frequently asked Questions
Have questions? Get answers. While your small business accountant will be able to answer your more complex queries, we can help you with the basic ones.
Would I be required to show specific receipts when claiming tax rebates or exemptions?
Yes, you need to document the expense in order to claim it. Mostly bookkeeping services providers can help you document those, but you need specific receipts when filing tax returns. For, e.g., form T777 when claiming fuel/ automobile expense.
Can I deduct the expenses paid to take care of my dependents?
Yes. One may deduct expenses as per mentioned criterion for their spouse, common-law partner, children, or even a family member who is mentally unstable.
Does the cost of employing a nanny qualify as a deductible expense?
Many physicians working full time would require external help to take care of their children and may also employ a full-time nanny in such a case. If the condition is true, the salary paid to the nanny can also be classified as a deductible expense and treated under childcare.
Can one leverage off income splitting with their spouse?
You can make your spouse a non-voting member of your company if you want to retain decision-making rights. They can receive dividends or even a salary if allowed under Law. This will particularly help the ones whose spouses fall in a low tax bracket.
Can I claim my spouse’s tax credits?
Better yet, you can also claim your common-law partner’s unused tax credits. These can also be provincial tax credits that one can use while filing tax returns. If you think that this would not help you much, then you are wrong. The savings can be substantial.
It is true for everyone living in Canada that income taxes take away a huge chunk of money from their gross income. However, there are tax-deductible expenses and tax rebates that can help you save a bigger chunk of your income from being given away as tax. As a practitioner, a small business accountant may be able to help you figure out which expenses can be treated as tax-deductible. Their fee also becomes a part of your business expense, but the savings that they may bring are promising.