Tax deferral

Most healthcare professionals who are not incorporated are directly and personally taxed at the highest marginal rate (e.g. 53% in Quebec) on the income they earn from practicing (RAMQ, OHIP, insurance, private practice etc.). 

 

However, by incorporating, their professional corporation becomes a separate taxpayer with its own income tax rates. The current corporate tax rate is 17.5%.

 

Any surplus income that the professional does not need to support their lifestyle can be retained inside the corporation and taxed at a lower corporate tax rate of 17.5% and can even be invested. 

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This means that by incorporating, the professional otherwise taxed at the highest marginal rate will have approximately twice the funds available for investment. 

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See an example of tax deferral