It’s a myth that physicians are all high earners who never have any financial problems. In fact, doctors tend to start their careers later than most and carry tremendous amounts of debt in their early years of practice.
Medical students and physicians can benefit greatly from the advice of a financial experts like our chartered professional accountants. From debt management to tax reduction to retirement planning, a CPA can provide doctors with sound strategies to maximize their earning capacity and plan for the future.
While you focus on your patients, let someone else run the numbers. Here’s how our CPAs can help you streamline your finances at every stage of your medical career:
Medical Students
Medical school funding can be an enormous burden when beginning a medical career, and many students accumulate tens of thousands of dollars in debt. Making sure that your debt is managed well is essential.
A CPA can help you prioritize which debt to pay off first, like high interest credit card balances and unsecured lines of credit, and identify less expensive debt like federal student loans. Debt repayment planning will put you in control while efficient management will help you avoid paying unnecessary interest or penalties.
Medical students can also benefit from special tax credits and deductions for tuition and even exam fees. If you’re unable to use your entire amount in one tax year, you may be able to carry it forward by transferring unused amounts to someone like a spouse or common-law partner or a parent or grandparent. A CPA can ensure you take full advantage of any available tax efficiencies.
You’ll also want to be aware of exemptions that may apply to you. In April 2021, the federal government announced that there would be no accrued interest on the federal portion of Canada Student Loans until March 2023. You may be eligible for a tax credit of 15% on interest accrued before this time.
Costs associated with moving or personal medical care as well as some childcare costs may also be tax deductible while you’re a medical student. Ask a CPA how you can access these savings when filing your taxes.
New Doctors
In addition to managing accumulated debt, new doctors face a number of other financial challenges as they begin their careers.
Objective financial advice and tax guidance can help you plan for the growth of your practice. Plan to set aside money for quarterly tax installments and ask a CPA to help you capture any tax efficiencies available to you.
You’ll also want to consider how to financially structure your practice. Incorporating is costly and complex but offers tax savings and investment opportunities. It can also enable your partner to be involved in your practice with employee shareholder options that allow for income-splitting to reduce taxes.
Depending on your personal family situation and financial needs, you can opt to pay yourself a salary, receive dividends, or combine these two options. A salary allows for RRSP contribution room but you’ll need to pay employee and employer portions of CPP contributions. Your salaried income as an individual is taxable, but it’s also a business expense that’s deductible for your corporation.
If you opt for dividends, you’ll benefit from a lower tax rate individually but it won’t be a deductible tax expense nor create room for RRSP contributions. You will, however, be exempt from CPP contributions.
Choosing to blend these strategies allows you to create RRSP room or benefit from CPP contributions to a certain allowable maximum, then top up your earnings with dividends to meet your financial obligations.
One of our CPAs can discuss these options with you and make personalized recommendations based on your unique financial situation and needs.
Planning for Retirement
It’s never too early to plan for your retirement, and physicians who are used to a comfortable standard of living will need to consider how to fund the years after they stop practicing medicine.
This requires a depth of understanding of your own risk tolerance. You’ll want your investments to be diversified in stocks and bonds and make regular contributions to ensure you’ll have accumulated enough wealth in order to maintain your standard of living once retired.
Getting sound financial advice early can help you prepare for your retirement. Depending on where you are in your career, you may also be able to take advantage of a new Medicus Pension Plan for incorporated physicians that’s being launched in 2023 by MD Financial Management Inc. and Scotiabank, or Blue Pier’s pension solution for physicians in British Columbia, Alberta, and Ontario.
Financial Expertise Pays Off
Whether you’re a medical student just embarking on your career or an established physician with a thriving practice, getting tailored financial advice specifically for doctors can set you up for future success. Put our CPAs on your team and make sure your finances are as healthy as you want your patients to be.
