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Physician guide · 2026
Student loans, lines of credit and your medical corporation.
Your corporation cannot pay your personal student debt tax-free. Loan payments are made with after-tax personal money, which means drawing income out of the corporation. That is why heavy debt and early incorporation often do not mix, and why the order you do things in matters.
How it works
Debt is paid with personal, after-tax dollars.
To put $1 toward a line of credit you must first take salary or a dividend from the corporation and pay personal tax on it. Every dollar pulled out for debt is a dollar that does not get the corporate deferral. If most of your income is going to debt and living costs, the corporation has little left to defer.
What is and is not deductible
- Government student loans: interest paid earns a non-refundable personal tax credit. The federal portion has been interest-free since April 1, 2023; the Ontario portion still charges prime plus 1%, and that interest accrues during the six-month grace period.
- Bank professional lines of credit: interest on money borrowed for tuition and living costs is not deductible, personally or in the corporation.
- Money the corporation borrows for the practice (equipment, leaseholds): that interest is deductible to the corporation.
Borrowing from your own corporation
A shareholder loan has to be repaid within one year after the end of the corporation's tax year in which it was made, or the amount is added to your personal income. It is not a way to clear student debt.
A sensible order
1. Pay down the highest-interest debt first, usually the line of credit.
2. Incorporate when there is steady money left over after debt payments and living costs.
3. Once incorporated, take only what you need personally and let the rest build inside the MPC.
Loan forgiveness
Family physicians and residents working in communities under 30,000 people can have up to $60,000 of Canada Student Loans forgiven over five years. The amount escalates — roughly $8,000 in the first year rising to $16,000 in the fifth — so do not budget it as $12,000 a year. Apply within 90 days after each year of service. Details are on our grants and funding page.
Quick answers
What physicians ask about debt.
Can my medical corporation pay my student loans?
Not tax-free. The corporation can pay you salary or dividends, and you repay the loan from that after-tax money. A direct payment of a personal debt by the corporation is a taxable benefit to you.
Is the interest on my professional line of credit deductible?
No. Interest on money borrowed for tuition and living costs is not deductible. Only interest on government student loans earns a personal tax credit.
Should I incorporate or pay off my loans first?
If nearly all your income is going to living costs and debt, pay down the high-interest debt first. Incorporation pays once there is income you can leave in the corporation.
Can I borrow from my corporation to pay off my line of credit?
Only briefly. A shareholder loan not repaid within one year after the corporation's year-end is added to your income, so it does not work as a long-term solution.
Sources: CRA guidance on student loan interest and shareholder loans; Canada Student Loan forgiveness for family doctors and nurses. General information, not advice for your situation. See also when to incorporate.
Carrying debt and wondering about timing?
Call 647-870-8498 or email info@ghayurtax.com. We will map the debt, the income and the right year to incorporate.