Medical Professionals

Doctors have lobbied hard over the years to obtain the same tax advantages as other small business people. The right to incorporate was a big win. Now most doctors include a corporation as part of their structure. They may also tax plan by having family members as shareholders.

I would like to start our review by looking a the long term savings of incorporation. A typical example would be as follows:

One time savings on incorporation:

  • Sale of goodwill – immediate reduction in tax on what would have been a dividend – $ 40,000
  • Purchase of $ 500,000 in goodwill by the corporation – total savings over time – $ 45,000
  • Claiming the $ 800,000 capital gains exemption on the eventual sale of your practice- $ 200,000

Annual savings on $ 500,000 of income:

  • Lower overall corporate and personal tax – Starting in 2014 the saving were eliminated
  • Income splitting with low income spouse – $ 18,000 per year
  • Interest write off on personal debt – $ 12,000
  • Greater tax relief on other expenses – $ 500
  • Potential deferral of tax – $ 150,000