Time is a precious commodity for medical professionals, who must find enough hours in the day to balance their personal and professional lives while ensuring the well-being of their patients. Facing an inexhaustible workload, it’s no surprise that many medical professionals have little time to invest in cutting their tax bill. The same issue applies to business owners outside the medical profession, as they invest so much of their time and energy into business sales, operations and marketing, among other things. Regardless of how smart or financially-savvy they are, the time to manage complex corporate tax issues simply is not there.
Once a year, a business owner might take a quick look at the available deductions while filing their income taxes, and then get right back to work. This is a potentially costly mistake, one that can easily be avoided with qualified guidance and support.
There are simple steps business owners can take to stop paying more taxes than necessary. For example, today many doctors and self-employed professionals choose to incorporate, a relatively straightforward and often surprisingly lucrative process.
A corporate tax structure offers numerous opportunities for you to keep more of their hard-earned wealth. Let’s review some of the essentials:
Put your practice to work for you
Did you know that corporate taxes are generally lower than personal taxes. This means you can pay yourself a salary that covers minimum living expenses while the rest of your money remains practice income subject to a lower tax bill.
So if you earned $200,000 in a year, but incorporated and paid yourself a salary of $60,000 to cover the bills, that leaves $140,000 to be taxed at the lower rate.
With qualified support, there are even more beneficial possibilities. Your mortgage, for example, may qualify as a tax-deductible corporate loan, and large withdrawls from your practice can be organized to minimize the resulting tax bill.
Recognize family contributions
If your family helps with your practice, another benefit of incorporation is that you can pay them a large salary largely excempt from the Canada Revenue Agency’s reasonableness restrictions. Combined with the use of trusts and appropriate dividend payments, you can save thousands simply by reflecting the work your family members put into your practice.
Take advantage of niche opportunities
Working alongside your tax professional, my team can help you identify tax-saving opportunities that apply to your unique circumstances. You may be able to plan family vacations around business trips, or justifiably attribute numerous other expenses to your practice. There may be changes you can make to pension plans and investments for added savings.
The possibilities are endless
Most medical professionals simply don’t have the time to fully reduce their tax bill. That’s why qualified guidance and support are so valuable. If you’d like to learn more about putting your practice to work for you, I welcome your questions.
*ScotiaMcLeod does not offer tax advice, but working with our team of experts we are able to provide a suite of financial services for clients