Life Time Capital Gains Exemption (LCGE)
If you own a Dental practice, Pharmacy, Veterinarian clinic or a Chiropodist clinic you can qualify for the tax free exemption of $850,000+. The application can be made upon the sale of shares of the clinic, pharmacy, etc.
Lower Tax Rates – Deferral of Taxes
Medical Professionals are in the highest income tax bracket, paying over 53% marginal tax rate in Ontario. By incorporating your medical business you can manage and defer taxes for a lower corporate tax rate of 13.5%.
Tax Free Dividends
Annually, you could receive up to 50,000 a year worth of tax free dividends from your corporation.
All loans for shareholders must be returned by the end of the 2nd fiscal year end. So if you were to take a loan in current fiscal year then the loan should be returned before the end of the 2nd year following the fiscal year it was taken out in. This can be adjusted and repaid via dividends, bonus or salary.
By utilizing proper record keeping your corporation can be used to purchase automobiles. It is common for corporations to provide vehicles for the use of the corporation’s directors. Mileage logs must be maintained and the distance from the place of residence and primary place of work is not deductible. Every situation has to be individually assessed.
Executive Life Insurance
Perhaps one of the great benefits of incorporating is also paying a life insurance policy from the corporation directly. This avoids tax triggers on the personal side since the marginal tax rate on personal is up to 53% in Ontario vs 13.5% in Ontario.
A home policy can be implemented for employees of the corporation for the purposes of purchasing a primary residence. Interest is payable to the corporation and proper documentation is required with salaried employees of the corporation.
Money left in the corporation can be used in years when there are life changes like pregnancy, travel, etc. Also the tax can be deferred to retirement years so the marginal tax rates remain low over the life of the corporation versus paying it immediately at very high marginal rates.
Looking for finance and accounting help? Dean and Associates Accounting has over 40 years of combined experience working with Medical Professionals, Small Business Owners, and Non for Profit Organizations.