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9 Advanced Tax Strategies Every Incorporated Doctor in Ontario Should Know (But Probably Doesn’t)

If you’re a physician in Ontario operating through a professional corporation (PC), chances are your accountant has already told you the basics — split income when allowed, invest surplus cash, defer tax. But what if you’ve outgrown the basics? What if your PC is building serious retained earnings, you’re starting to think about succession, or you just want to get more out of your hard-earned dollars?

This post dives into less talked about yet highly effective tax strategies that sophisticated doctors — and their advisors — are using to optimize wealth, reduce tax, and plan for the long game.

1. Structure a Holding Company to Unlock Flexibility and Protection

Instead of investing directly from your PC, consider adding a holding company above it. This allows you to:

Move retained earnings tax-free via intercorporate dividends
Invest in passive assets without affecting your PC’s small business tax rate
Isolate risk and improve creditor protection

Pro tip: Use different share classes in your HoldCo for future estate freezes or income splitting.

2. Build a Business Inside Your PC That Qualifies for the Lifetime Capital Gains Exemption

Doctors usually can't sell their PC and claim the $1M LCGE — but what if part of your practice could qualify? Consider:

Spinning off a side business (e.g., medtech app, diagnostics, consulting)
Restructuring ownership to isolate active business assets

Suddenly, that tax-free $1M capital gain becomes a real planning opportunity.

3. Maximize Your Retirement with an IPP (and Then Some)

An Individual Pension Plan (IPP) is a powerful alternative to RRSPs. Contributions are tax-deductible to your PC and can exceed RRSP limits as you age.

Bonus strategy: Pair it with a Retirement Compensation Arrangement (RCA) to create even more flexible, creditor-protected retirement income.

4. Balance Salary and Dividends — with Tax Deferral in Mind

Yes, you've heard of this. But have you considered:

Paying just enough salary to maximize RRSP and CPP?
Using corporate-class investments to minimize tax drag inside your PC or HoldCo?
Timing dividends to reduce personal clawbacks like OAS or child benefits?

5. Lend Money to Your Kids (Legally)

A prescribed rate loan to a family trust can help you shift passive investment income to lower-taxed family members.

Example: Lend $500,000 from your HoldCo to a trust at 5%, invest it, and have income taxed in your kids’ hands instead of yours.

6. Use Insurance for More Than Just Protection

Life insurance inside your PC can:

Build tax-sheltered investment growth
Create a large tax-free payout on death
Credit your Capital Dividend Account (CDA), allowing tax-free cash to flow to your estate or heirs

Advanced tip: Combine this with a HoldCo to pass along corporate wealth without triggering personal tax.

7. Keep Your Corporation “Clean” for the Future

Even if you’re not planning to sell, “purifying” your corporation helps:

Preserve eligibility for future LCGE planning
Keep the door open for estate freezes or family trust strategies

This means moving excess cash and passive investments out of the PC and into a HoldCo or trust.

8. Own Real Estate the Smart Way

Many doctors buy their clinics or medical buildings personally. But if you’ve got retained earnings inside your PC or HoldCo, corporate ownership could be more tax-efficient.

Extra layer: Lease the property back to your PC and structure income to flow to a spouse or trust.

9. Bulletproof Your Practice from CRA Scrutiny

With tighter rules on professional corporations, the CRA is watching. Clean corporate governance—separate finances, documented meetings, clearly defined roles — can:

Reduce audit risk
Strengthen your case in tax disputes
Protect your PC’s small business status

Final Thoughts

If your PC is just sitting on retained earnings and you’re not doing much more than paying yourself dividends… you’re leaving money on the table. The tax code offers sophisticated strategies tailored to professionals like you — but only if you know where to look.

Want to explore how these ideas could apply to your situation?
We work with incorporated physicians across Ontario to help them build, protect, and transfer wealth efficiently. Book a strategy call and let’s unlock what’s possible.