As a dentist, you’ve worked hard establishing your practice, and you want to maximize your earnings, including saving on taxes. 

When you receive unexpected tax bills, you may think you’ve been charged too much business taxes. That’s why you need tax tips and an expert specializing in tax planning for dental professionals.

Here are our steps to take for ethical ways to cut taxes.  

Keep It in the Family

Many dentists have a dentistry professional corporation (DPC). If a family member works part-time at your practice year-round, it’s considered a “sharing of income.” 

Paying your family member in dividends through your DPC means savings on taxes. If your spouse’s sole income is $30,000 in dividends, their personal tax is $1,000 or less. But they can’t claim child care benefits.

Here’s more on income sharing:

  • Last year, a dentist made $200,000/year with $70,000 in personal taxes

  • This year, they pay their spouse to work reception for $65,000/year

  • The dentist’s income is now $135,000 with $52,000 in personal taxes

  • The dentist saves $18,000 in personal taxes

There are also tax savings for optimizing salaries and dividends through your DPC. 

Tax Tips on Setting up Corporate Structure

When a DPC is structured correctly, your lifetime capital gains exemption (LCGE) will benefit. 

  • For instance, an LCGE of $892,218 won’t face regular income tax when your practice is sold for profit 

  • It equals a saving on taxes of nearly $240,000

Some dentists fear the government will remove the LCGE. But you can still own your practice and claim the LCGE by optimizing your RRSP contributions every year.

Take Advantage of These Rules on Business Taxes

Revenue Canada has accelerated tax deductions on capital assets: 

  • Write-off new equipment, computers, software 

  • Install new sterilizing/autoclaving equipment 

It’s an excellent time to upgrade your office and receive savings on taxes in light of the global pandemic.

If you hold staff parties or give out holiday gifts, read this to save on business taxes:

  • Recording staff party expenses as meals and entertainment is a 50% allowable deduction

  • But six (6) meals are 100% deductible if your entire staff is there

  • Two non-cash employee gifts are allowed per staff member ($500 total value, tax-free), and you don’t have to withhold CPP, EI, or income tax 

You can look to your life outside your practice for other savings on taxes.

Ethical Ways To Cut Taxes and Save for the Future

If you’re thinking about your children’s post-secondary education, here’s a tax strategy:

  • Registered Education Savings Plan (RESP) contributions are tax-efficient ways to save for post-secondary education

  • A grant (gift) from Revenue Canada equals 20% of the first $2,500 of annual RESP contributions per child ($500 annually)

If you donate, give publicly traded shares at increased values to your favorite charity. Your charitable tax receipt will reflect the fair market value of the donated shares, and you won’t pay personal taxes on it.

Speak With Us

Our tax tips help dentists pay less tax. You earn more in your practice with our ethical ways to cut taxes.

We take pride in our proactive tax strategies. We’d be happy to meet you and discuss your practice through a free phone consultation

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