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Physician guide · 2026
When should an Ontario physician incorporate?
Incorporate when you earn more than you need to spend. A medicine professional corporation (MPC) does not lower the tax on money you take home; it defers tax on the money you leave inside. If everything you earn goes to living costs and debt, the corporation mostly adds fees.
The math
What the corporation actually does.
Ontario cut its small business rate from 3.2% to 2.2% on July 1, 2026. The cut is prorated across a tax year that straddles that date, so for a December 31, 2026 year-end the first $500,000 of active income is taxed at about 11.7% combined, falling to about 11.2% (9% federal plus 2.2% Ontario) for the first full year after the change — 2027 for a calendar year-end. The top personal rate in Ontario is 53.53%. Income you don't need this year can stay in the MPC, taxed at the low rate, and be invested or paid out in a lower-income year: a parental leave, a sabbatical, retirement.
When the money comes out as salary or dividends, personal tax applies. The system is designed so the combined tax is close to what you would have paid personally. The benefit is the deferral, plus flexibility over timing.
Signs it is time
- You are in independent practice and billing through OHIP or privately, not employed on a T4.
- After tax, living costs and debt payments, there is meaningful money left over each year.
- Your high-interest debt is under control (loan payments are made with after-tax personal money, so they force income out of the corporation).
- A low-income year is coming that retained earnings could fund.
Why most residents should wait
Resident income is mostly employment income, which cannot go through a corporation, and moonlighting income is usually needed for living costs and loans. The annual cost of an MPC outweighs a small deferral. The first or second year of practice is the usual point to run the numbers.
What it costs
To set up: the incorporation, the $300 Ontario filing fee and the CPSO Certificate of Authorization ($400).
Every year: the CPSO renewal ($175), corporate financial statements and a T2 return, and a little more bookkeeping, typically a few thousand dollars in total.
The steps
1. Incorporate under the Ontario Business Corporations Act with a name in the CPSO format (your surname plus “Medicine Professional Corporation”).
2. Apply to the CPSO for the Certificate of Authorization.
3. Open the CRA accounts and a corporate bank account, and direct your billings to the corporation.
4. Choose a year-end (we prefer December 31) and set a salary and dividend plan.
Quick answers
What physicians ask about incorporating.
Should a medical resident incorporate?
Usually not yet. Resident pay is employment income, which cannot be earned through a corporation, and any moonlighting income is normally needed for living costs and loan payments. Revisit the question in the first year or two of independent practice.
How much tax does a medicine professional corporation save?
It defers tax rather than eliminating it. Income left in the corporation is taxed at about 11.7% combined for a December 31, 2026 year-end, and about 11.2% from 2027 once Ontario's July 1, 2026 rate cut applies for a full year, compared with up to 53.53% personally. Tax is paid personally when the money is withdrawn, so the benefit depends on how much you can leave inside and for how long.
What does the CPSO charge for a Certificate of Authorization?
$400 for a new certificate and $175 for each annual renewal, paid online to the CPSO.
Does investment income inside the corporation cause a problem?
It can. Once passive investment income passes $50,000 a year, the federal small business limit starts to shrink. Ontario does not apply the same reduction. It is a planning point, not a reason to avoid incorporating.
Sources: CPSO incorporation FAQ; the 2026 Ontario Budget for the small business rate change, which the CRA rate tables have not yet caught up with; CRA corporate tax rates. General information, not advice for your situation. See also salary versus dividends and our incorporation service.
Want the numbers for your practice?
Call 647-870-8498 or email info@ghayurtax.com. We will tell you plainly whether incorporating pays yet.