Are you watching too much of your hard-earned income disappear to taxes each year? As an associate dentist in Canada, you’re likely paying close to 50% of your income in personal taxes – but it doesn’t have to stay that way.
After working with hundreds of dental professionals, we’re still amazed by how many associate dentists miss out on legitimate tax-saving opportunities. Most think tax planning is only for practice owners, but associates actually have some incredible options available – if you know where to look.
Today we want to share the most effective strategies that can help you keep thousands more of your income every year.
Professional Corporation: Your Biggest Tax Win
Most associates don’t know this, but you can incorporate your practice even without owning the clinic. Setting up a Dental Professional Corporation (DPC) is honestly the most powerful tax strategy available to Canadian associate dentists.
Look at the math: corporate income gets taxed at approximately 15.5% on the first $500,000, compared to personal tax rates that climb as high as 53% in some provinces. We’re talking about a difference of over 37 percentage points.
Take Dr. Sarah who makes $200,000 as an associate. Without incorporation, she pays roughly $90,000 in personal taxes. With a properly structured DPC, that same $200,000 gets taxed at the corporate rate of about $31,000, leaving $169,000 in the corporation. Even after paying herself a reasonable salary and dividends, she saves approximately $25,000 annually.
The catch? You must avoid the Personal Services Business trap. The CRA has specific rules designed to prevent associates from simply incorporating and continuing their employment relationship. Work with a specialist who understands these rules – the wrong structure can cost you more than staying as an employee.
Income Splitting: Your Family’s Tax Advantage
Once you have a DPC, income splitting becomes incredibly powerful. By making family members shareholders (even non-voting shareholders) you can distribute income to those in lower tax brackets.
Your spouse earning $30,000 from dividends might pay less than $1,000 in taxes, while that same $30,000 would cost you $15,900 if earned personally. That’s $14,900 back in your family’s pocket annually.
The rules are strict though. Salaries must be reasonable for actual work performed, and recent Tax on Split Income (TOSI) rules have tightened things up. But when done correctly, this strategy remains incredibly effective.
RRSP Strategy Before You Incorporate
Before incorporating, maximize your RRSP contributions. For 2025, you can contribute up to $32,490 or 18% of your previous year’s income, whichever is lower.
This matters because that RRSP contribution doesn’t just reduce your current taxes – it also reduces your “earned income” for the following year’s calculation. This can be particularly strategic in your transition year to incorporation.
If you’re earning $180,000, maxing out your RRSP saves you approximately $16,245 in taxes (at a 50% marginal rate). That’s money you can reinvest or use to fund your incorporation setup costs.
Capital Gains Exemption Planning
Long-term thinking pays off here. The Lifetime Capital Gains Exemption allows you to receive up to approximately $883,000 tax-free when you eventually sell shares in your DPC. That translates to potential tax savings of over $236,000.
The key is planning early. Your corporation’s structure needs to qualify, and you can’t have passive investments that disqualify you. Some associates even multiply this exemption by making family members shareholders.
Professional Expense Deductions
Whether incorporated or not, claim all eligible professional expenses:
- Continuing education courses and conference travel
- Professional memberships and licensing fees
- Professional journals and publications
- Home office expenses (for administrative work)
- Professional liability insurance
- Equipment and tools
A typical associate can claim $5,000-10,000 in professional expenses annually, saving $2,500-5,000 in taxes.
The Reality of Implementation
These strategies require upfront investment and ongoing professional support. Incorporation costs typically run $3,000-5,000 initially, plus annual accounting fees of $3,000-6,000. But when you’re saving $20,000+ annually in taxes, the return is excellent.
The sweet spot for incorporation is usually when you’re consistently earning more than $120,000 and not spending every dollar you make. If you can leave money in the corporation to grow tax-deferred, the benefits multiply over time.
Taking Action
Your tax plan should grow with your dental career. Whether you’re just starting out or have years of experience, there are real opportunities available to reduce your tax burden and build long-term wealth.
Start by speaking with a tax professional who specializes in dental practices—someone who can run the numbers for your specific situation and recommend the right strategies for you.
Every dollar saved in taxes is a dollar that can go toward your goals, your freedom, and your future. At Dental Tax, we help associates unlock thousands in annual savings—and those gains add up fast. Ready to see what’s possible? Let’s talk.
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