Doctors and Dentists are a few professionals that can benefit from strategies that can lead to lower taxes. As busy professionals, most of the time Doctors and Dentist put their taxes and accounting matters in the back-burner; therefore, it is important that they have the right Toronto Chartered Accountants by their side and take care of those matters. Below are some of the ways that Doctors and Dentist can benefit from tax savings.
Income Splitting Opportunity
Doctors and Dentists can use their professional corporations as a means to income split with their spouse or adult children (older than 18 years). There are two way to do this.
1) Issue Some Shares to Your Spouse
Another class of shares, non-voting, can be issued to your spouse and/or adult children. This provides flexibility on declaring dividends on the class of shares issued to your spouse if there are other sources of income that may have arisen for that particular year. Also, now you can spread the dividends across family members and generally dividends of up to $35K can be received personally tax free (if there are no other sources of income in addition to the dividend)
2) Have your Spouse or Family on the Payroll
You can also have your family members on the payroll. This will result in salary expense to the company that can be deducted. However, there will be payroll taxes to remit to the receiver general for CPP and Withholding taxes. Also, the salaries need to be reasonable and the duties of the employment should be documented in the event CRA reviews the salary.
Keep Track of Meals & Entertainment
We find that most Doctors and Dentist don’t keep track of the expenses relating to meals and entertainment. Any expense that pertains to carrying on the professional services can be deducted and would include meals and entertainment spent on professional staff, clients, seminars, presentations, etc. Meals and entertainment expenses are 50% deductible for tax purposes; however, these expenses add up if tracked appropriately.
Corporate Life Insurance
This is a good tool to consider for your practice. In most instances, the practice is a single dentist or doctor and in the event of death, the practice will no longer be able to continue. Therefore, it is a good idea to think long term and protect the business that is dependent on the professional. The life insurance has many tax benefits as well:
1) The value of the life insurance plan grows tax free since
portion of the insurance premiums are invested in securities in the policy.
2) The assets in the life insurance policy is protected within the policy and separate from the corporation from any legal claims
3) Corporate Life insurance allows you to pay for premiums through the corporation without using after tax personal dollars.