On average, most physicians that work in a hospital setting have approximately $20,000 in expenses each year. The following provides a guideline of the common expenses:
Accounting and legal fees
Accounting and legal fees incurred for company purposes are tax deductible. (It is important to note that accounting and legal fees relating to individuals and family trusts should be paid and claimed by those entities, not the company.)
Books and instruments
Books and instruments that you purchase as part of running your medical practice also qualify as a deductible business expense.
Capital asset purchases
This would include computer hardware and software, office furnishings and equipment and leasehold improvements. These assets are written off over their estimated useful lives.
These expenses include conference registration fees, airfare, hotel, cabs and car rentals. (Note: the costs incurred for a spouse who accompanies the physician on the trip are not deductible.) There is a limit of two conferences per year that are deductible.
Dues and memberships
Dues and memberships vary, but for most physicians they add up to $5,000-$6,000 per year. Some common dues are:
- Doctors Nova Scotia
- The College of Physicians and Surgeons of Nova Scotia
- The College of Family Physicians of Canada
- The Royal College of Physicians and Surgeons of Canada
- Registry of Joint Stocks
This includes the premium paid to Doctors Nova Scotia (DNS) for additional health and dental coverage.
DNS also issues a T3 slip for the premiums that it pays directly to Blue Cross on behalf of doctors. The T3 slip should be in the name of the medical company – not the individual doctor’s name.
Malpractice insurance is provided by the Canadian Medical Protection Association (CMPA) and is fully deductible for accounting and tax purposes. Any rebate received in a year from CMPA will reduce insurance expense.
Life insurance is deductible for accounting purposes if the medical company is both the owner and beneficiary of the policy. Generally, life insurance is rarely deductible for tax purposes. To be deductible for income tax purposes, the insurance policy must be required as security for a company loan.
Disability insurance is generally a personal expense and should not be paid for by the company as it is not tax deductible.
Office overhead insurance is generally a business expense and is tax deductible by the company.
Meals and entertainment
This covers meals and entertainment expenses which you incur to help grow your practice. For example, this might include your meals at a medical conference or meals when meeting with other physicians. It is important to note that only 50% of the total expense is deductible for income tax purposes, generally.
There are some important exclusions to keep in mind. Meals for your children and spouse are not deductible.
This is the cost you pay for your office lease.
Expenses under this heading is for anything relating to the office or administration of the company that does not fall under another expense category, such as office supplies and software purchases less than $500.
Salaries and wages
The salaries paid to the physician and administrative staff are deductible by the company. Salaries and wages paid to employees other than the physician must be reasonable in amount or else the amount deemed unreasonable by CRA is not deductible by the company.
This would include your office phone, cell phone and Internet that you use for your medical practice.