How Doctors and Medical Residents can reduce taxes on Salary to increase Cash Flow

Doctors and medical residents typically incur a large amount of debt when they attend school. Work for these professionals mean hectic schedules and long hours leaving very little time for financial planning.

At the same time, a healthy cash flow is desirable because they want to pay off their debts as soon as possible.

That is why today we’ll highlight two options which medical professionals can take to improve their cash flow.  

Option 1:

The simplest way to get more cash coming in is to work more. This does not mean that you should work more at your primary job. Instead you can look for opportunities to stand in for a colleague who is absent (locum), moonlight or even sublease your property.

Keep in mind that you’ll need to report the earnings from these methods but there are deductions available for these expenses as well.

Option 2:

This option is specifically for those physicians who are getting a salary. The Canadian Revenue Agency (CRA) has a form for employed doctors which provides the option of identifying credits which the doctors qualify for. This consequently allows their employer to reduce the taxes deducted at the source of income.

This is the T1213 form, Request to Reduce Tax Deductions at Source. It is very useful as possible deductions can include employment expenses, child care, support payments, medical expenses, moving expenses, donations, RRSP contributions and carry-forward tuition credits.

If you are a medical student, than this form might be useful for about 2 years of residency. Again, this depends on the tuition credits available and the income they earn annually.

If you need guidance according to your specific situation, feel free to contact us at Syed A. Raza Professional Corporation. You can reach us at 647-499-6636 or raza@accountantcpa.ca

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