Understanding What Your Income Sources Are
Depending on your situation, your income may come from one or more sources:
- employment income: the income you earn from a hospital or any other employer you work for
- scholarships and bursaries
- self-employment income: the income you earn from a business you operate yourself
As an incorporated physician, your income sources would likely be employment income, dividend income or both.
Employment income refers to the income you earn from the hospital or any other employer you work for. Employment income can include:
How do I know what my employment income is for a given year?
Your total gross earnings (what you earn before taxes and deductions are applied) will be recorded by your employer on a T4 slip. This slip must be sent to you no later than the last day of February to report your previous year’s income.
What other information does a T4 slip include?
Besides your total gross earnings, a T4 slip will also include details such as these:
- Canada Pension Plan (CPP) deductions
- employment insurance
- income tax deductions
- union dues
Scholarships & Bursaries
Any scholarships, fellowships and bursaries you receive in connection with you being enrolled at an educational institution may be excluded from your income if you qualify for the education tax credit.
Medical students are generally enrolled in programs for which they are entitled to an education tax credit, so all scholarships and bursaries are generally tax-exempt. For residents and fellows, if they are entitled to the education tax credit, scholarships and bursaries are also tax-exempt.
What about post-doctoral fellowships?
Generally, post-doctoral fellowships are taxable. This is because they generally do not lead to a diploma or degree.
Do I have to report scholarship and bursary amounts on my income tax return if they are tax-exempt?
How do I know if I qualify for the education tax credit?
Whether you qualify will be detailed on a form that your educational institution is required to provide you with. In tax language, this is known as Form T2202A. Although this form does not need to be filed with your return, it must be made available if CRA requests it.
Self-employment income is the income you earn from a business you operate yourself. This is known as a sole proprietorship. Examples include the income earned from locums during residency or after completing residency, as well as the income earned at a hospital by a staff physician who is not incorporated.
Self-employment income can also be the income you earn from a business you operate with someone else. This is known as a partnership. An example of a partnership is two doctors operating a medical clinic together.
How will I know what my income is?
As a self-employed individual, you are responsible for keeping track of what your income is.
This is the opposite of what occurs when you are employed by somebody else as they are required to provide you with a T4 detailing your income.