Expenses For Physicians and Medical Professionals

As a self-employed physician or medical professional, you have a much broader range of expenses that you can claim compared to medical residents who earn employment income. A self-employed medical professional can deduct most expenses necessary to carry out their medical professional activities. These expenses must be “reasonable in the circumstances”, and of course, some exceptions apply.

In this article, we aim to provide a comprehensive list of expenses that medical professionals or clinics can claim. Simply speaking, more expense means less taxable income and less tax bill. But by no means, this is an exhaustive list.

Annual membership fees: Membership fees paid to provincial and other professional associations/societies/professional groups are deductible. Examples of professional associations include:

1. Ontario Medical Association (OMA) / Canadian Medical Associations (CMA)
2. Royal College of Physicians and Surgeons of Canada
3. Royal College of Physicians and Surgeons of Ontario
4. Royal College of Dental Surgeons of Ontario
5. College of Physicians and Surgeons of Ontario
6. College of Nurses of Ontario
7. College of Dental Hygienists of Ontario
8. College of Massage Therapists of Ontario
9. College of Midwives of Ontario
10. College of Occupational Therapists of Ontario
11. The College of Opticians of Ontario
12. College of Chiropodists of Ontario
13. Other Canadian, provincial, and foreign professional associations.

In the same way, medical professionals or clinics may deduct the cost of any other membership or license they need to carry out their professional activities.

Salaries, wages, and contract/consultant fees:

Expenses related to salaries and wages paid to staff involved in delivering services are deductible. This includes both employees and contractors/consultants. The amount you deduct should be reasonable with the nature of their responsibilities. Importantly, if these employees are family members, the Canada Revenue Agency (CRA) may closely examine these deductions, so it’s crucial to ensure they are well-supported and meet the necessary criteria.

Some examples of the staff that medical professionals or clinics need include secretarial staff, associates, nurses, assistants, bookkeeper, accountant, billing agents, general admin staff, etc.

Office rent and maintenance cost:

Office rent and other premises-related expenses such as property taxes, condo/maintenance fees, insurance, and repairs, are all examples of tax-deductible expenses. If you run an office at home, you may deduct expenses applicable to the portion of the house that is being used for professional purposes.

Bank charges, interest, and other financial charges:

Bank fees, administrative charges, credit card fees, etc. are deductible expenses. Similarly, if you purchase an office or any assets for the medical clinic and pay interest on that, it is a tax-deductible expense.

Automobile expenses:

These expenses can be claimed by physicians, dentists, nurses, etc. who use their cars for professional purposes. However, commuting to and from work is not considered eligible for tax deduction. If the car is used for both personal and business purposes, deductions are calculated based on the proportion of business use.

Out-of-town travel:

Deductible expenses are those incurred traveling “away from home” on work-related or on continuing-education trips away from your primary residence. For tax purposes, your “home” is typically considered to be the entire city or general area where your main workplace is situated. Expenses eligible for deduction include transportation, meals, lodging, tips, as well as various miscellaneous items such as laundry and valet services.

Convention expenses:

Physicians, surgeons, nurses, and other medical professionals can deduct the cost of going to a maximum of two conventions a year. The conventions must:

1. relate to your business or your professional activity and
2. be held by a business or professional organization within the geographical limits of where the sponsor of the convention usually does business

Training expenses and medical books, and manuals:

If you obtain training related to your profession or sent your staff to attend the training, the cost is tax deductible. The cost of books, manuals, and research material acquired is tax deductible.

Continuing medical education

Most professional organizations require their members to maintain, improve and update their professional knowledge, and medical professionals are no exception. Professional medical associations require their members to complete minimum hours of education to maintain their membership. Continued education courses are deductible and not subject to the limitation of two conventions per year.

Business gifts and promotion materials:

Gifts and promotion expenditures are legitimate business expenses and tax-deductible for physicians, medical clinics, etc. Of course, gifts or any promotional material must be for the sole purpose of business development and reasonable in the circumstances.

Meals/entertainment expenses:

Occasional meals with partners/staff, other physicians, and referral sources may be deductible where professional matters are discussed or when there is a business purpose.  These may include general office matters, scheduling, treatment procedures, and possible alternative therapy with physicians. Meal and entertainment expenses are subject to the 50% rule, meaning only up to 50% deduction is allowed. 

Additionally, for up to six special events per year, such as staff holiday parties, 100% of meal and entertainment costs are deductible.

Insurance premiums:

Insurance premiums paid for malpractice insurance, property insurance, and overhead are deductible. One can’t claim premiums for life insurance or personal disability insurance unless it was required by the financial institution as collateral for the loan.

Startup costs and fees to acquire an existing practice:

All costs related to obtaining and maintaining a license to practice as a medical professional, related training, or costs to comply with the license issuing authority’s requirement is a business expenses. Similarly, the cost of acquiring an existing practice, consulting fees (accounting and/or legal), valuation, etc. is all deductible.

Advertising or digital advertising cost:

All business promotions cost whether print, electronic, digital (website, social medical marketing, etc.) direct, or indirect, and product promotions are allowed expenses for medical professionals like any other business.

Office, expense, stationery, and supplies

Supplies required for delivering medical services are another type of business expense. Also, medical uniforms and scrubs are legal expenses for medical clinics, hospitals, and medical professionals. Other office-related expenses such as stationery, postage, newspaper, and general cleaning stuff are also tax-deductible expenses.

Utility expense

Utilities consumed by the office of a physician, dentist, hygienist, therapist, clinic, or hospital are tax-deductible expenses. This may include telephone, heating, water supply, internet, etc.

Professional fees

Any legal fees paid for the purpose of the business are a legal expense. Similarly, if you engaged an out-source accountant to maintain your books, prepare financial statements, and file tax returns, you can claim these tax-deductible expenses.

Bad debts:

Like any other professionals medical professionals are no exception when it comes to bad debts.  You can deduct an amount for a bad debt if you determine that an account receivable is a bad debt in the year, and it was already included in the income.

Equipment & fixed assets -capital items:

The assets that serve a business over a period of time are not deductible right away. These costs are recorded as capital assets and their cost is distributed over the life of assets through a system called depreciation (in accounting) and capital cost allocation (in the tax system).

The capital items include office furniture, computers, medical instruments, surgical equipment, automobiles, office buildings, and leasehold improvements. These spendings are not deducted in the year but are subject to depreciation or capital cost allocation.

How long do you need to keep your receipts?

You are required to keep your receipt for six years in case CRA audits you. With the abundance of technology, it is very easy to maintain receipts electronically for a long time on the computer, cloud storage, or through apps. The CRA will also accept scanned receipts. Remember bank or credit card statements themselves are not enough. CRA will ask you to produce receipts/invoices. Otherwise, expenses will be disallowed by the CRA’s auditors.

The above is a common list of expenses that will apply to most situations. However, each situation is different, and it is highly advisable to consult a qualified CPA. Otherwise, you might face a CRA audit and be surprised by an unexpected tax bill or might be missing out on various possible tax-saving deductions.

The above expenses may alleviate the tax burden. However, as a medical professional or clinic, you often face a significant tax burden that might hinder the achievement of your long-term financial objectives. By incorporating your medical practice, you can potentially defer some immediate tax obligations and accelerate your retirement savings. However, the decision to incorporate requires careful consideration, as it not only offers a means to enhance your wealth but also introduces added complexity to your overall financial situation.

If you have any questions about tax planning, investing, or retirement planning, contact Source Accounting Team at 647 930 8130 for consultation.

If you are a physician, dental surgeon, massage therapist, occupational therapist, optician, nurse, radiographer,  physiotherapist, chiropractor, or other medical professional or run a medical clinic or practice and need assistance with tax filing, tax planning, accounting, and bookkeeping, the Source Accounting Team will be happy to help. Please get in touch with us at info@sourceaccounting.ca or call 647-930-8130 for further details.

Disclaimer: The above contents are provided for general guidance only, based on information believed to be accurate and complete, but we cannot guarantee its accuracy or completeness. It does not provide legal advice, nor can it or should it be relied upon. Please contact/consult a qualified tax professional specific to your case.