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Physicians & healthcare professionals
Accounting and tax for physicians and medical professional corporations.
Corporate year-ends and T2s for your MPC, the family's personal returns, and a straight answer to the question every physician asks us first: should I incorporate — and when?
Should I incorporate?
Incorporation defers tax. It doesn't erase it.
An Ontario medicine professional corporation pays about 11.7% combined tax on its first $500,000 of practice income for a December 31, 2026 year-end. Ontario cut its small business rate to 2.2% on July 1, 2026, but the cut is prorated across a tax year that straddles that date, so the full effect — about 11.2% — arrives in 2027 for a calendar year-end. The top personal rate in Ontario is 53.53%. That gap, roughly 42 cents on every dollar you can leave in the corporation, is the whole reason to incorporate.
But the personal tax is deferred, not avoided. When you eventually pay yourself, you pay it. A physician who takes everything out every year ends up in roughly the same place as an unincorporated one, with more paperwork and a few thousand dollars a year in extra costs.
What incorporation gives you
- Deferral on what you retain. Money left in the corporation is invested at the low rate, or used to smooth income across a parental leave, a sabbatical or retirement.
- A choice of salary or dividends. Salary builds RRSP room and CPP; dividends don't, but avoid payroll costs. Most physicians use a mix that changes as income and plans change.
- Some income splitting. Ontario lets a spouse, children and parents hold non-voting shares, but the tax on split income (TOSI) rules mean dividends to family members who don't work in the practice are generally taxed at the top rate. The exceptions — a spouse once you're 65, or a family member who works 20 or more hours a week in the practice — are real, but narrower than they were before 2018.
- Room to add later. A corporate health spending account, and an individual pension plan when the numbers justify it.
What it doesn't do
- Protect you from a malpractice claim — the professional liability stays with you and your CMPA coverage.
- Reduce your total tax on its own.
- Come free — expect a setup fee plus the government and CPSO Certificate of Authorization fees, then annual accounting, filing and CPSO costs.
When it makes sense
The test is simple: can you leave money in the corporation? If you can retain $40,000 to $50,000 a year or more after paying yourself what you actually spend, incorporation usually pays for itself quickly. If you spend everything you earn, wait — you'll get the cost without the benefit.
The other signs it's time: your billing is stable and self-employed (residents and salaried physicians can't run employment income through an MPC), you'd rather build an investment pool out of income taxed at about 12% than out of income taxed at 53% (what that pool then earns is taxed at about 50% inside the corporation, with part of it refunded when dividends are paid), and you can see yourself in practice for years.
Rough numbers
Take $100,000 of practice income you don't need to live on.
Kept in the corporation: about $88,300 left to invest inside the MPC.
Taken personally at the top rate: about $46,500 left after tax.
Ontario 2026 rates; assumes the small business deduction applies and this income sits above the top bracket. Your numbers will differ — this is the shape of it, not a quote.
One thing to plan for
Once the corporation earns more than $50,000 a year in passive investment income, the federal small business limit starts to shrink — $5 of limit for every $1 of investment income above $50,000, and gone entirely at $150,000. Ontario does not apply the same reduction. It's a good problem, and an easy one to manage if you see it coming.
If you have student loans
Pay down the debt, or defer the tax?
Loan payments come out of personal, after-tax dollars — the corporation can't pay them for you. So the real question is whether surplus income should clear the debt or stay in the corporation at about 11.7%. The answer depends on which loans you have.
- The federal portion of Canada Student Loans has been interest-free since April 2023. There is no return in rushing it. Pay it on schedule.
- The Ontario portion of OSAP charges prime plus 1%, and the interest earns a non-refundable credit on your personal return. Worth paying steadily, not urgently.
- A bank professional line of credit usually runs near prime, with no tax credit. High-rate debt is different from low-rate debt: clear anything expensive first. For debt near prime, the deferral is large enough that keeping the payments on schedule and retaining income in the corporation often comes out ahead — provided the retained money is actually invested rather than spent.
- Don't fold government loans into a bank line without thinking about it: you'd give up the interest-free federal portion and the credit on the Ontario interest.
We run both paths — repay first, or incorporate and retain — with your actual income, debt and spending before you decide. It takes an hour and it's usually obvious once the numbers are on the page.
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Year one of practice: stay unincorporated
Income is variable and you're learning what you actually spend. Build a cash cushion and clear any high-interest debt.
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Incorporate when you can retain $40–50K a year
Pay yourself a salary that covers living costs and the loan payments. Leave the rest in the corporation.
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Keep the loans personal and on schedule
Federal portion interest-free; claim the credit on Ontario and other government loan interest each year.
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Review every year
As income rises, revisit the salary-and-dividend mix, RRSP room, and when the passive-income rules start to bite.
What we do for physicians
The corporation, the family's returns, and the decisions in between.
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Incorporation, decided with numbers
Both scenarios modelled on your income, debt and spending. If it's a yes, we prepare and file the incorporation with the share provisions an MPC has to have and give you the documents your CPSO application needs — the application to the College is yours to make. We set a December 31 year-end so the corporation and your personal return run on one calendar, and open the CRA and payroll accounts. How incorporation works with us →
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MPC year-end and T2
Financial statements and the corporate return, with the small business deduction, passive-income and shareholder-loan rules watched through the year rather than discovered at filing.
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Personal returns for the family
Your T1 and your spouse's and children's, prepared with the corporation so dividends, salary and credits are planned as one picture.
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Compensation planning
Salary versus dividends each year, RRSP, TFSA and FHSA room, CPP, and how much to leave inside the corporation.
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Bookkeeping and OHIP reconciliation
Deposits matched to remittance advices, clinic overhead and cost-sharing tracked, and books that are ready for year-end in January.
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HST check
Most OHIP-insured services are exempt, but medico-legal reports, cosmetic procedures, some third-party work and consulting can be taxable. We check whether you need to register, and file if you do.
Guides for physicians, dentists and clinics
Straight answers to the questions we hear most.
Common questions
What physicians ask us first.
I'm a resident. Should I incorporate now?
No. Residency income is employment income on a T4 and can't be run through a medical professional corporation. Incorporate once you're billing as self-employed — locums or your own practice — and can leave money in the corporation.
Can the corporation pay my student loans?
No. Student debt is personal. The corporation pays you, by salary or dividends, and you pay the loan. If the corporation paid it directly, the amount would be taxed to you as a shareholder benefit or treated as a shareholder loan.
Can my spouse own shares in my MPC?
Yes. Ontario allows a spouse, children and parents to hold non-voting shares in a medicine professional corporation. Whether it helps depends on the tax on split income rules: dividends to a spouse who doesn't work in the practice are generally taxed at the top rate until you turn 65. We plan it case by case.
Which year-end should I choose?
We usually recommend December 31. It lines the corporation's year up with your personal return, so salary, dividends, RRSP room and instalments are all planned on the same calendar and nothing falls between two periods. A different month can make sense in a few situations, and we'll tell you if yours is one of them.
How much does incorporation cost?
A fixed fee for the incorporation and setup, plus the government filing fee and the CPSO Certificate of Authorization fee you pay the College directly, and then a few thousand dollars a year for the corporate return, financial statements and annual filings. The Certificate of Authorization renewal stays with you — you file it with the CPSO each year and pay their fee directly. Call or email and we'll give you the number for your situation.
Do you handle my personal return too?
Yes — we prefer to. The corporation and the family's returns are one plan, not two.
General information for Ontario physicians and medicine professional corporations, not advice for your situation.
Thinking about incorporating?
Call 647-870-8498 and we'll run the numbers with you.