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Tax deductions: What self-employed physicians can claim

Pensive man with glasses

If you’re a self-employed physician, there are a lot of expenses that you can claim and deduct on your tax return.

This article will review business expenses for sole proprietors (i.e., you’re practising solo and you’re not incorporated). In this situation, you file personal tax returns that include self-employment income. However, many of the expenses discussed below are also relevant for incorporated physicians, who would file a corporate tax return in addition to a personal tax return.

Deductions reduce the amount of tax you have to pay on your income. In general, business expenses are those that you incur to earn business income and they should be a reasonable amount.

Eligible expenses

The following is an overview of what self-employed physicians can claim, set out in the same order as in Canada Revenue Agency (CRA) form T2125 – “Statement of Business or Professional Activities”:

Advertising

  • Advertising, including via Canadian radio and television stations, and Canadian newspapers
  • Digital advertising

Note that restrictions apply for advertising in a periodical.

Meals and entertainment (50%)

  • Meals with medical partners/staff, other doctors and referral sources where professional matters are discussed (e.g., reviewing treatment techniques)
  • Occasional entertainment with medical partners

Insurance

  • Property insurance for the space you’re leasing
  • Practice overhead insurance

You can’t claim your premiums for life insurance or personal disability insurance.

Interest and bank charges

  • Interest costs if you borrowed money for business purposes or to acquire property for business purposes

Business taxes, licences and memberships

  • Canadian Medical Protective Association membership — you can deduct the amount minus any rebate from a provincial reimbursement program
  • Provincial and territorial medical associations membership
  • Canadian Medical Association membership
  • National Specialty Societies membership
  • Royal College of Physicians and Surgeons of Canada annual membership
  • College of Family Physicians of Canada membership
  • Medical licence from your province
  • Businesses taxes, including municipal taxes and land transfer taxes
  • Subscriptions to medical-related publications

Office expenses

  • Pens, pencils, paper clips, stationery and stamps

Office stationery and supplies

  • Medical/surgical supplies
  • Uniforms/scrubs

Professional fees

  • Legal fees
  • Accounting fees

Management and administration fees

  • Includes fees for processing payments (e.g., credit cards)

Rent

  • Lease

If you work from home, see our article Home office expenses for physicians.

Property taxes

  • Property taxes you incur for property used in your business (for the period it is available for rent)

Salaries, wages and benefits

  • For administrative and support staff (e.g., reception, bookkeeping) and nursing staff

Eligible expenses include Employment Insurance and Canada Pension Plan/Quebec Pension Plan premiums that the employer pays.

Travel expenses

  • Airfare, hotel, taxi and other transportation expenses for up to two conferences a year — this two-conference limit doesn’t apply if you are presenting at the conference

Utilities

  • The basic monthly rate for your phone — if you have a separate phone for business calls only
  • Heat, water and electricity for the property used in your business

Motor vehicle expenses

  • Fuel, repairs and maintenance, parking, toll charges, insurance, monthly financing or lease payments, and depreciation on the cost of the vehicle

You can claim only the portion that you use for business purposes (e.g., travelling to multiple clinics, going to a business meeting or conference) — logging these details could be onerous, so you should weigh whether your time is worth the savings in taxes.

Capital cost allowance

  • Office furniture, computers, electronic medical records software, medical instruments, automobiles, office buildings, leasehold improvements

These expenses are not fully deducted in the year but subject to depreciation over the expected lifespan of the asset. 

Other expenses

Start-up costs

  • Medical licensing exams
  • Related prep courses

Medical books

  • The cost of books held at the time you start to practise and of additional books acquired over time

Conferences and education courses

  • Up to two conventions a year, related to medical professional activities
  • Local continuing medical education courses

Other questions about expenses

How long do you need to keep your receipts?

You should keep your receipts for six years in case you’re audited by the CRA. Organize your receipts in envelopes by month to find them easily and keep them in a dark place so the receipts don’t fade to the point of being unreadable. The CRA will also accept scanned receipts.

How should you keep track of everything?

One way to keep track is to use a credit card for as many of your business expenses as possible. You can download and sort when you get your monthly statement. There are also apps that help you track expenses.

If you have any questions about tax planning, investing or retirement planning, contact your MD Advisor*. They can also refer you to an accountant if you need one.

*MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.

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.