Tax Planning for Medical and Dental Businesses – Lawyers in Montreal Helping Clients Maximize Their Financial Success
Running an optimized medical or dental practice allows healthcare professionals to accelerate business growth and meet financial goals. However, without a carefully considered tax plan, that hard-earned income could be depleted by high tax obligations. Unfortunately, managing a medical or dental business is time-consuming, and effectively navigating the complex and ever-changing tax codes is typically beyond the capacity and skill sets of most care providers.
It is critical to consult a trusted legal firm that deeply understands your industry and the applicable tax laws to ensure you retain as much of your wealth as possible while complying with necessary rules and regulations. MÉDICALOI can evaluate the needs of your practice and assist you with tax planning, from optimizing your current tax situation to providing guidance on special tax considerations involved in succession and estate planning. Contact our Montreal law firm today for practical advice on tax planning strategies that can benefit your business.
How Can Deductions Decrease A Healthcare Professional’s Tax Burden?
Identifying all available deductions is a key component of tax planning. Deductions diminish a healthcare professional’s overall taxable income, thereby decreasing the percentage of profits lost to taxes. A wide variety of deductions exist within the tax code, but it requires skill to determine which items may apply to your situation and to pre-plan your actions to maximize your deductions. Maintaining careful records of your practice-related expenses throughout the year is essential to pinpointing potential deductions. These detailed records also protect you in the event of a government audit.
By exploring the various discretionary expenses you may be able to deduct from your income as a medical professional or dentist, such as:
- Licensing expenses
- Professional fees and dues
- Malpractice insurance premiums
- Costs for continued education and training
- Home office expenses
What Impact Can Incorporation Have On Medical Business Taxes?
The taxes paid by a sole proprietor of a medical business in Quebec can be exceedingly high. Astonishingly, the tax rate for the income of a medical professional who has not incorporated can frequently surpass 50%. Incorporating your practice can significantly reduce your overall tax obligation as corporate business income is taxed at a considerably lower rate. Depending on your circumstances, you may also be able to avail yourself of other tax-reducing benefits of incorporation, such as income-splitting.
However, it is necessary to carefully evaluate your overall financial situation and goals before undertaking incorporation. Corporations are tightly regulated, require considerable planning and regular maintenance, which adds extra costs to your business. Additionally, filing taxes for a corporation is complex and engenders the need for a dedicated tax professional to ensure the filing is completed properly. Healthcare professionals must weigh the added expenses related to incorporation against the potential tax benefits to determine whether it is advantageous to restructure their practice.
What Further Tax Strategies May Be Useful for Medical Business Operators?
Tax planning is a highly individualized endeavor. While we aren’t an accounting firm, our team will evaluate the financial situations and objectives of your business, yourself, and your family members to better understand your circumstances. This evaluation, coupled with an in-depth study of your investments, retirement plans, and other relevant information, will allow us to design a personalized plan that optimizes your tax position and minimizes tax liability.
As part of our planning process, we will ascertain your eligibility for many methods of reducing your taxable income, including, but not limited to, the following:
- Maximizing contributions to Registered Retirement Savings Plans (RRSPs)
- Investing excess income in Tax-Free Savings Accounts (TFSAs)
- Setting up a Health Spending Account (HSA) or Flexible Spending Account (FSA)
- Leveraging structures and diversifying for tax-efficient investment
- Utilizing small business deductions
- Investing in tax-exempt life insurance policies
- Making charitable donations
- Applying for Capital Cost Allowance (CCA) on equipment purchases
- Setting up an Individual Pension Plan (IPP)
What Tax Complexities Do Medical Professionals Face?
Federal and provincial tax laws are updated yearly, and these changes may significantly impact your tax planning strategies. Working with lawyers and tax advisors who can keep you abreast of the newest regulations and help you revise your business plan to meet your goals and satisfy compliance standards is crucial. Integrating flexibility into a medical business’s tax strategy is vital to maximizing savings. Therefore, our firm engages in tailor-made tax planning that can be adapted as your career advances and your financial circumstances change.
When people think of taxes, they tend to focus on yearly income taxes. However, the guidance of a knowledgeable tax professional can be crucial at many points during the course of your healthcare career. If you are considering any of the following actions, consulting a firm that is well-versed in the tax landscape of the health profession is strongly recommended:
- Buying or selling a clinic or practice
- Investing in property or stocks
- Planning for retirement
- Adding or removing a partner
- Transitioning to a new stage of your personal life, such as marriage, divorce, or the birth of a child
- Engaging in estate planning
- Passing your practice to associates or family members
Why Should I Choose MÉDICALOI?
MÉDICALOI integrates effective tax planning as part of an overall medical business plan that supports your career growth and goal achievement. Our legal team has extensive knowledge of the tax challenges faced by healthcare professionals, and we have fostered connections with financial advisors and tax professionals who can bring their considerable experience to bear on the planning process. Financial stability is fundamental to the success of your business, and careful tax planning strategies that are customized to your personal circumstances can play a key role in minimizing your tax liability. Contact our Montreal office today at (438) 805-5515 to schedule a comprehensive complimentary intake meeting and learn how our experience can benefit you.