The 2026 tax year introduces several key adjustments that could meaningfully influence the financial performance of your dental practice. From capital gains and corporate tax planning to equipment depreciation and payroll obligations, these updates affect how you invest, compensate yourself, and plan for long-term growth. Understanding the changes ahead gives you the advantage — allowing you to make strategic decisions, protect profitability, and stay ahead of potential tax pressures.
Capital Gains Rules: What to Watch Going Forward
The federal government’s previously proposed increase to the capital gains inclusion rate has been paused, maintaining the current 50% inclusion rate for now. While this preserves the existing tax treatment on the sale of practices, investment properties, and high-value equipment, it also highlights how quickly tax policy can shift.
For dental practice owners, this creates an important planning consideration: timing and structure matter more than ever. Even without immediate changes in effect, future budgets may revisit capital gains, lifetime exemptions, or corporate tax strategies. Reviewing your long-term exit plan, corporate structure, and potential sale timelines with an accountant who specializes in dental practices can help ensure you’re positioned to adapt quickly — and take advantage of opportunities under the current rules.
Changes to Professional Corporation Tax Planning
Professional corporations will face tighter oversight in 2026 as the CRA strengthens its approach to income splitting and passive investment income within incorporated practices. The adjustments are designed to limit strategies that previously allowed high-income professionals to reduce taxable income significantly.
Dividends paid to family members will be subject to more rigorous “reasonability” tests, requiring evidence that each individual meaningfully contributes to the practice. Clearly defined job descriptions, fair-market compensation, and detailed documentation will be more important than ever.
Passive investment income rules also become stricter. Exceeding the allowable investment income threshold can reduce or eliminate your access to the small business deduction, resulting in a higher tax rate on your active practice income. Monitoring your corporation’s investment portfolio — and adjusting it if necessary — will help protect your eligibility.
Dental Equipment Depreciation Rules
The phase-out of the Accelerated Investment Incentive continues in 2026, lowering the first-year depreciation benefit on new equipment purchases. Items such as digital imaging systems, scanners, and CAD/CAM technology will no longer qualify for the enhanced allowance that previously permitted up to 150% of the normal Capital Cost Allowance in year one.
Depreciation is still available, but the tax savings are now spread more evenly over the asset’s lifespan. If you’re considering major technology upgrades, comparing the depreciation benefits of purchasing in 2025 versus 2026 can highlight significant differences. In some cases, acquiring equipment sooner may provide stronger tax value.
Employee Benefits and Payroll Tax Updates
Tax treatment for employee benefits continues to evolve in 2026, with new thresholds and clarifications on what constitutes taxable versus non-taxable perks for dental office staff. Traditional group health and dental premiums remain deductible for your practice and non-taxable for employees, but certain wellness-oriented benefits, such as gym memberships or flexible wellness accounts, may receive different tax treatment and should be reviewed carefully.
On the payroll side, CPP contribution rates are scheduled to increase again, affecting both employer costs and employee take-home pay. Ensuring your payroll systems and budgets reflect these adjustments will help you avoid year-end surprises.
Action Steps for Your Practice
Before year-end, connect with a dental-focused accountant to review your tax strategy and identify where the upcoming changes will have the greatest impact. Early planning allows you to adjust compensation structures, corporate arrangements, and investment decisions while options are still available.
If you compensate family members through your corporation, ensure all roles and payments are fully documented and defensible under the updated rules. Employment agreements, time records, and defined responsibilities will be critical.
Review your corporation’s investments and asset planning to determine whether restructuring is needed to maintain tax efficiency. Small adjustments now can help preserve deductions and prevent unexpected tax increases.
Prepare Now, Benefit Later
A smoother financial future starts with the right strategy — and the right specialists by your side.
The 2026 tax changes introduce new challenges for Canadian dentists, from higher capital gains inclusion rates to stricter corporate rules and evolving depreciation and payroll requirements. Navigating these updates takes more than general tax knowledge — it requires an advisor who understands the unique financial landscape of dental practices.
Dental Tax specializes exclusively in serving the tax, accounting, and planning needs of dentists. Our team helps you understand the new rules, refine your practice structure, and make informed decisions that safeguard your profitability and long-term stability.
If you want to stay ahead of the 2026 shifts, now is the perfect time to connect and map out your next steps.
Adam has an MBA from the Richard Ivey School of Business in London and also holds a Chartered Investment Manager designation.
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