Many physicians were nervous about how their professional corporations would fate when the 2016 federal budget was unveiled.
But incorporated doctors were, overall, happy to see that what they most feared — losing a small business tax deduction — didn’t happen. There were also no changes to income splitting with family members — another tax-planning tool that can be helpful to physicians.
However, the government has frozen the small-business tax rate. According to the Medical Post, here’s what that means for physicians:
The tax rate for businesses earning $500,000 or less will be set at 10.5% for the foreseeable future. While this is still lower than the 15% corporate tax rate larger businesses incur, it marks a departure from legislation that was enacted by the Conservative government to eventually lower the rate to 9% over the next three years. Ultimately, this means that doctors with professional corporations earning $500,000 or less will now be paying more taxes in the next few years than they would have if the rate was lowered.
