Tax tips for resident physicians

For use in preparation of 2023 tax returns

As a resident physician, your tax returns may be relatively simple, but the process is likely to become much more complex as your career progresses.

What’s more, federal and provincial income taxes will be one of the most significant expenses you incur during your professional career. By taking advantage of all available deductions and tax credits, you can minimize the taxes you pay and maximize your cash flow and financial position.

Federal income tax brackets

This guide can help you understand which tax credits, expenses and other deductions may be available to you. It also covers the government benefit programs you may be eligible for, and much more.

A. Employment expenses and credits

1. Union, professional and other dues
2. Employment insurance premiums
3. Moving expenses
4. Canada employment tax credit

B. Education

1. Scholarships and bursaries
2. Tuition amount
3. Exam fees
4. Interest on student loans
5. Provincial tax credits and tuition cashback programs

C. Family, child-care and caregiver deductions and credits

1. Claim your spouse’s or common-law partner’s unused tax credits
2. Claim an amount for supporting a spouse or common-law partner
3. Claim an amount for supporting an eligible dependant
4. Child-care expenses

D. Pension and savings plans deductions and credits

1. RRSP contributions
2. Canada Pension Plan contributions

E. Other tax deductions and credits

1. Carrying charges
2. Home buyers’ amount
3. Medical expenses
4. Medical expense supplement (for those with high medical costs)
5. Disability tax credit
6. Charitable donations

Conclusion

A. Employment expenses and credits

1. Union, professional and other dues

If you paid for membership in the college of physicians and surgeons of your province or territory, your medical association or your residency association, these amounts are generally deductible for tax purposes if they are required to maintain professional status recognized by statute. You do not need to file your official receipts with your tax return, but be sure to keep them in case the Canada Revenue Agency (CRA) asks to see them.

Your membership fees for the Canadian Medical Protective Association (CMPA) membership fees are deductible (minus any rebate you received from your province).

Deduct as professional dues (Line 21200 on the federal return)

• Alberta
• British Columbia
• Manitoba
• New Brunswick
• Newfoundland and Labrador
• Ontario
• Québec
• Saskatchewan

Deduct as an employment expense (Line 22900 on the federal return)

• Nova Scotia
• Prince Edward Island
• Yukon
• Northwest Territories
• Nunavut

2. Employment insurance premiums

Residents are salaried employees and, as such, are required to make contributions to Employment Insurance (EI). You’ll see these deductions on your pay stubs and on the T4 slip you receive from your employer every year. These contributions qualify for non-refundable federal and provincial tax credits.

Amount: For 2023, the maximum annual EI premium amount was $1,049.12 (based on maximum insurable earnings of $63,200).

Access to EI benefits

Because you pay EI premiums, if you complete your program of study and are unable to find work, you may be eligible for EI benefits. You also qualify to receive special benefits — including maternity, parental or sickness benefits — if you have worked the required insurable hours.

3. Moving expenses

If you moved at least 40 kilometres to be closer to a new work location in 2023, you may be able to deduct moving expenses against employment income earned at the new location.

If you have allowable moving expenses that can’t be deducted in the current year because you haven’t earned enough income, you may be able to carry them forward and apply them against income in another tax year. Retain your receipts in case the CRA asks for them.

Moving expenses can include things like:

• transportation and storage costs
• travel expenses
• temporary living expenses
• the cost of cancelling a lease
• costs of utility connections and disconnections

The rules for moving-expense deductions can be complex. You can find more information on the CRA website, but we suggest that you talk to a tax advisor before including these deductions on your tax return.

4. Canada employment tax credit

As an employee, you can claim a federal non-refundable employment tax credit to help you cover your work-related expenses. You can claim a credit equal to 15% of your employment income for the year, up to a maximum of $1,368 for 2023. (The maximum amount is indexed for inflation every year.)

B. Education

1. Scholarships and bursaries

If you’re a resident or a fellow, you may benefit from the tax-exempt status of all scholarships and bursary income if you are considered a full-time student at an educational institution. The scholarship exemption is available for a post-secondary program that consists principally of research only if the program leads to a college diploma or a bachelor’s, master’s or doctoral degree. Because of this, post-doctoral fellowships are generally considered taxable.

You don’t need to report any exempt scholarship and bursary amounts on your income tax return. However, you may want to keep supporting documentation, such as Form T4A, in case the CRA asks for it.

The provisions of the Income Tax Act (Canada) about scholarships and bursaries can be confusing. If you’re in doubt, talk to your tax advisor.

2. Tuition amount

Tuition fees paid during a residency program are eligible for a federal 15% non-refundable tuition tax credit, which can be used to reduce your taxes payable.

Keep in mind that fees paid for application, admission, use of library or laboratory facilities, examinations (including re-reading) and diplomas, as well as mandatory computer service fees and certain academic fees, qualify as eligible tuition fees.

Other tuition fees, such as for Advanced Trauma Life Support (ATLS) courses and certain Licentiate of the Medical Council of Canada (LMCC) preparation courses, may also qualify for the tax credit. Contact your course administrators for more details, and be sure to obtain all appropriate documentation for these courses from them.

Your qualification for the tuition tax credit will be detailed on your Form T2202. Although you don’t need to file Form T2202 with your return, keep it in case the CRA asks for it.

If you have unused tuition credits

If you don’t use your entire tuition credit in the current year to reduce your tax owing to nil (you can’t use the credit to generate a refund), any remaining credits can be transferred to an eligible person — such as your spouse or common-law partner or, under certain restrictions, a parent or grandparent — up to a maximum of $5,000.

Another option if you have unused tuition tax credits is to carry them forward and use them when you have sufficient income or in practice. Any amount you don’t use in the current year and don’t transfer to an eligible person will automatically be available to carry forward. Once you have enough income to use the carried-forward tax credits, you can apply them to reduce your taxes payable.

3. Exam fees

The Medical Council of Canada (MCC) grants a qualification in medicine known as the Licentiate of the Medical Council of Canada (LMCC) to graduate physicians who have satisfied the eligibility requirements and passed the Medical Council of Canada Qualifying Examination Part I (Part II was eliminated as of June 2021). The MCC registers candidates who have been granted the LMCC in the Canadian Medical Register.

According to the MCC website, at the time of publication of this document, exam fees are eligible for the tuition tax credit. Certain ancillary fees, such as centre change request fees (for a change of exam location) or late fees — up to a maximum total of $250 — are also eligible.

You can find your receipt by logging in to your physiciansapply.ca account.

4. Interest on student loans

Tax credit for interest paid: If you paid interest during 2023 or during the five preceding five years on loans negotiated and still existing under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or a similar provincial or territorial loans program, you can claim a 15% federal non-refundable tax credit on that interest (if not previously claimed). Provincial non-refundable tax credits may also apply.

Interest paid on a personal loan or line of credit does not qualify for the tuition tax credit.

If you have interest payments to deduct but you have no taxes payable for this year, do not claim the interest paid on your current tax return. Instead, carry it forward and claim it on any of your tax returns in the next five years. Note that unlike other tax credits, such as the tuition tax credits, the CRA does not keep track of the carry-forward amounts for you..

Proof of interest paid: If you had eligible student loans in 2023, the financial institution handling your Canada or provincial student loans will mail to you, in early 2024, a statement of the actual interest paid on the loans during the year. Keep this statement or receipt in case the CRA asks to see proof of interest paid.

5. Provincial tax credits and tuition cashback programs

Several provinces offer tax credits and incentives to encourage university graduates to live and work in their respective provinces. Be sure to consult your tax advisor to determine what effects these incentives might have on your personal income tax return.

C. Family, child-care and caregiver deductions and credits

1. Claim your spouse’s or common-law partner’s unused tax credits

If your spouse or common-law partner has little or no income, they may have tax credits, including provincial credits, you can use when completing your tax return. The tax savings can be substantial.

Schedule 2 of your income tax return outlines the non-refundable tax credits that can be transferred from one spouse to the other.

How is a common-law relationship defined?

Two individuals living in a conjugal relationship are usually deemed to be common-law partners if they have cohabited continuously for at least one year or have a child together (whether natural or by adoption). It is your responsibility to declare your status properly. Failure to do so may result in lost benefits, assessed interest charges and potential future penalties for making false returns.

2. Claim an amount for supporting a spouse or common-law partner.

If you were married or in a common-law relationship at any time during 2023 and either you or your partner earned less than $15,000, the other partner can claim a non-refundable spouse/common-law partner amount for federal tax purposes.

Amount: For 2023, the amount of this credit is calculated by subtracting the low-income spouse/partner’s net income from $15,000 and multiplying the remainder by 15%. This can translate into federal tax savings of up to $2,250 ($15,000 x 15%, if the spouse/partner had no earnings). Generally, a similar provincial credit will also be available.

3. Claim an amount for an eligible dependant

If at any time during the year you were single or separated from your spouse/common-law partner and you supported an eligible dependant, you may qualify for the same maximum $15,000 federal tax credit available to married or common-law taxpayers who support their spouse.

Note: A taxpayer can claim the $15,000 amount only once. That is, you may be eligible to claim the personal amount for a spouse (item 2, above) and for another dependant under the eligible dependant rules (item 3), but you cannot make both claims in the same year.

4. Child-care expenses

With certain restrictions, you can deduct the cost of daycare, babysitters, boarding schools and camps. If your child attends private school, a portion of the tuition fees (if it relates to child-care services) may qualify as child-care costs.

Amount: You can claim up to a maximum of:

• $8,000 a year for children who are under 7 at the end of the year
• $5,000 a year for children age 7 to 16
• $11,000 a year for children who qualify for the disability tax credit
• $5,000 for children over 16 who do not qualify for the disability amount but who have a mental or physical impairment

Which spouse claims the deduction? The deduction must be claimed by the spouse/partner with the lower net income, except when this person is at school, disabled, separated from their spouse or in prison. Also, the deduction cannot exceed two-thirds of that person’s earned income.

Note: In practice, the CRA generally does not attach specific child-care expenses to specific children. That is, as long as total child-care expenses do not exceed the defined limits per child multiplied by the number of children, all eligible child-care expenses are generally allowed. To maximize your base for child-care deductions, make sure to report on your tax return all your children who are 16 years and under, and those with infirmities.

Make sure you keep proper receipts for child care so your claims aren’t denied upon review or audit by the CRA.

Ineligible child-care expenses: The following do not qualify as child-care expenses:

• Payments for medical or hospital care do not qualify as eligible child-care expenses. Instead, these payments may qualify as medical expenses (if eligible).
• As a general rule, you cannot claim fees for skating lessons, music lessons or other recreational/educational activities. Depending on the circumstances, certain children’s activities may be accepted by the CRA if you can demonstrate that the primary purpose of the activity is to provide child care, thereby enabling you to work. Be sure to speak with your tax advisor for further details.

D. Pension and savings plans deductions and credits

1. RRSP contributions

A registered retirement savings plan (RRSP) is a plan registered with the CRA that is designed to encourage you to save for your retirement. RRSP contributions can be deducted from your taxable income, to the extent that you have the available contribution room.

The money in your RRSP grows tax-free and is taxed only when you withdraw it from the plan. In other words, benefits include both tax savings (i.e., tax deductions for contributions) and tax deferral (i.e., growth and earnings are taxed only upon withdrawal from the plan).

Contribution limit: The RRSP contribution limit is 18% of your previous year’s “earned income” up to a maximum of $30,780 in 2023. The maximum contribution will be $31,560 for 2024. Your contribution room may have to be reduced by any pension adjustments. You may also have unused contribution room from prior years that you can carry forward indefinitely and use in future years.

Contribution deadline: For 2023 RRSP deduction purposes, the contribution deadline is February 29, 2024.

Other benefits of RRSPs

The benefits of an RRSP also include estate planning and income splitting in retirement, the latter via spousal RRSP contributions or possibly with pension income splitting. Provided certain conditions are met, you may also be eligible to withdraw funds from your RRSP without incurring tax to purchase a qualifying home (as part of the Home Buyers’ Plan) or to finance your post-secondary education (as part of the Lifelong Learning Plan). Generally, you have up to 15 years to repay these funds to your RRSP. If you have not already done so, discuss retirement planning and the benefits of RRSPs with your financial advisor.

2. Canada Pension Plan contributions

Canada Pension Plan (CPP) contributions qualify for non-refundable federal and provincial tax credits. For 2023, the maximum employee CPP contribution was $3,754.45 (based on maximum pensionable earnings of $66,600).

As an employee, you are required to make contributions to the CPP. You’ll see these deductions on your pay stubs and on the T4 slip you receive from your employer every year.

Starting in 2024, if you earn more than the yearly maximum pensionable earnings limit (YMPE) ceiling ($68,500) then you’ll also have to pay a second CPP contribution, called CPP2. CPP2 introduces a second earnings ceiling called the year’s additional maximum pensionable earnings (YAMPE), which is $73,200 in 2024. You will pay 4% on any income you earn that falls in the range between the YMPE and YAMPE ($68,500 and $73,200) to a maximum contribution of $188. If you’re self-employed you’ll pay 8% to a maximum of $376.

E. Other tax deductions and credits

1. Carrying charges

Expenses you incur to earn investment income (in non-registered accounts) are deductible for tax purposes. Examples include investment management fees, fees for investment advice, and interest paid on money borrowed for income-earning investment purposes.

2. Home buyers’ amount

If buying your first home: First-time homebuyers buying a qualifying home can claim a federal non-refundable first-time homebuyers’ tax credit equal to 15% of up to $5,000 in the year of purchase. This can result in a tax savings of up to $750. To qualify as a first-time homebuyer, you and your spouse or common-law partner must not have owned or lived in another home owned by either of you in the current or four preceding calendar years and must occupy the home as a principal residence within one year of the purchase date.

Similar incentives are also available in certain provinces, including British Columbia, Saskatchewan, Quebec and Nova Scotia.

The home must be a qualifying home, which includes single-family houses, semi-detached houses, townhouses, mobile homes, condominium units and apartments. When two people jointly buy a qualifying home, the total credit claimed cannot exceed $5,000.

If buying an accessible dwelling: The credit is also available (with no first-time requirement) for homebuyers who are eligible for the disability tax credit and for those buying a home for the benefit of a relative who is eligible for the disability tax credit, if the home is acquired to enable the person to live in a more accessible dwelling.

3. Medical expenses

The first year of residency can be the best time to incur any medical expenses (including dental and eye care expenses) you might have avoided while in medical school. Some of these costs could be partially or fully covered by your employer’s health insurance, and you may also be able to claim what’s not covered as a non-refundable medical expense tax credit.

Amount: For 2023, you can claim a 15% federal non-refundable tax credit on qualifying medical expenses in excess of either $2,635 or 3% of your net income, whichever is less.

What medical expenses are eligible? You can find an extensive list of eligible medical expenses on the CRA website. Beyond the usual prescription drugs and medications, dental services, and medical devices, here are some eligible medical expenses that are often overlooked:

• Medical cannabis: you will need a prescription to claim this.
• Gluten-free products: people with celiac disease can claim the difference in cost of these products, which can be expensive.
• Out of country medical services: if you travel outside Canada to get medical treatment, you may be able to claim the cost of the treatment.
• Travel expenses (more than 40 kilometres) to get medical services.
• Fertility-related procedures.

Any 12-month period: The CRA allows you to deduct medical expenses for any 12-month period ending in the year of the tax return.

Eligible family members: You can claim medical expenses for yourself, for your spouse or common-law partner, and your or your spouse’s children who are under 18 before the end of the taxation year. In certain circumstances, you may also be able to claim medical expenses for another family member who is dependent on you (or your spouse) for support. Restrictions apply, so talk to your tax advisor.

Use tuition tax credits before medical expenses: Be careful if you have significant tuition tax credits that you are carrying forward from prior years. Available tuition tax credits must be used before any medical expenses to reduce your taxable income. Be sure to talk to your tax advisor to determine your best course of action.

4. Medical expense supplement (for those with high medical costs)

If you are eligible for a non-refundable medical expense credit, you may also be entitled to an additional refundable amount. “Refundable” tax credits can provide you with a refund — so although certain conditions must be met, this supplement applies whether you have tax payable or not.

Amount: For 2023, a refundable medical expense supplement amount of up to $1,399 is generally available to people over the age of 18 who have incurred high medical expenses.

Worksheets: Many provinces have a medical expense supplement calculation on their worksheets, which come in your T1 personal income tax return package. If you use tax software, the medical expense section is built in.

5. Disability tax credit

Canadian taxpayers suffering from a severe and prolonged impairment may be eligible to claim a disability tax credit on their personal income tax return.

Amount: For 2023, the federal non-refundable tax credit is 15% of $9,428.

Who is eligible: You can claim the disability tax credit if:

• you have a severe and prolonged mental or physical impairment (the impairment has lasted or is expected to last at least one year);
• the impairment markedly restricts your ability to perform a basic activity of daily living, or you must dedicate a certain amount of time to life-sustaining therapy; and
• a doctor or other accepted medical professional has certified in writing that the two conditions above are true.

Ask your doctor whether they can certify that you have a qualifying impairment, and talk to your tax advisor about whether claiming this tax credit makes sense for you.

6. Charitable donations

Your first $200 of eligible donations to qualifying charities qualify for a federal non-refundable tax credit of 15%. Any contributions over and above that amount entitle you to a non-refundable tax credit of 29%. This tax credit rate increases to 33% if you have enough taxable income to be subject to the top 33% federal income tax rate.

Combine your claims: If you and your spouse or common-law partner make separate charitable contributions, consider claiming all your donations on a single return.

This way you will qualify for the lower tier (15% rate on the first $200) only once, as opposed to twice if donations are claimed individually, and more of your contributions will be eligible for the higher-tier tax credit.

Conclusion

We hope you’ve found this guide helpful. However, please remember that tax planning is a complex process and that the information in this guide does not replace advice from a professional tax advisor. We suggest that you talk to a tax professional to ensure you’re taking advantage of all the tax benefits available to you.

The tax legislation, tax rates and credit amounts in this guide are based on information available as of January 30, 2024 (except where otherwise noted).

The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.