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What Type of Tax Return Do Physicians Need to File?

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The taxation of doctors in Canada varies depending on how the business is run. Doctors own their practices in three common ways: sole proprietorship, corporations, and partnerships. Self-employed doctors should fill out a T1 Income Tax and Benefit Return since they are sole proprietors or single owners of the company.

Doctors who have incorporated their medical practices, meaning they have created a separate entity called a corporation that owns the business and is taxed separately, should file a T2 Corporation Income Tax Return for the company and a T1 Income Tax and Benefit Return for any dividends received from the company.

Finally, physicians who operate as partners will need to file a T5013 Partnership Return. Contact our talented legal team today for help understanding what return you need and how best to structure your medical business.

How are Self-Employed Physicians Taxed in Canada?

Many doctors think owning their business as a sole proprietor is the only way to practice medicine. However, these self-employed physicians are taxed at a much higher rate than those who own corporations, eating into hard-earned wealth much more than is necessary. The taxes will be calculated based on your personal income, meaning you could face tax rates of over 40% in Canada, depending on which province you live in. These huge prices could be avoided by incorporating your company, so you pay a much friendlier tax rate as a small business.

Does Incorporating a Medical Practice Offer Tax Benefits?

As mentioned previously, small businesses in Canada enjoy a much lower tax rate than individuals. For doctors who earn a high yearly salary, this can make a tremendous difference when it comes to how much they pay in taxes. Many doctors have debt from medical school that they work hard to pay off, and saving money from a lower tax rate can help pay off this debt much faster.

Deciding to incorporate your medical practice is a big decision that depends on your financial and personal circumstances. Please reach out to medical business lawyers like those at our law firm for help getting started.

Should You Hire Our Law Firm?

Our lawyers understand the unique challenges of running medical businesses, as we have worked with medical professionals for many years. We believe that each doctor should have access to the tools necessary to run an efficient and profitable business. One of those tools is incorporating the company to maximize the business’s earnings through a lower tax rate.

Making these decisions requires a great deal of legal proficiency, which falls outside the realm of most doctors’ knowledge and experience. But you don’t have to go it alone. Please reach out to our law firm right away if you would like to learn more about how incorporating can help minimize your tax burden as a doctor in Canada. Call us now at (438) 805-5515 to schedule a consultation.

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