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Tax Planning for Your Dental Practice

Greetings from Dentistry Enlightenment Club. As a dentist, you work hard to provide quality care for your patients. But are you taking care of your financial health as well? Tax planning is crucial for optimizing your income and securing your future. We would like to share some effective tax-saving strategies that we recommend for your dental practice:

  1. Incorporate Your Practice:

  • Incorporating your dental practice can offer significant tax advantages.

  • You can benefit from lower corporate tax rates (as low as 11% for eligible small businesses).

  • You can also shield your income from personal tax rates that can climb up to 53%.

  • Timing for incorporation is also important - You may not need to incorporate right away.

  1. Invest for the Future:

  1. You can utilize tax-free or tax-deferred vehicles such as Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or Individual Pension Plan (IPP) to save and/or defer taxes.

  2. You would need to pay special attention to investment in your corporation as the passive income might hit you on the small business deduction. You might want to strategically choose investments that structure distributions as return of capital to the investors, which are not taxable until the adjusted cost base of the investment reaches zero.

  3. Fund growth in corporate-owned life insurance is tax-deferred without incurring any passive income - this provides an ideal shelter when you are still active in practice. 

  1. Reduce Your Taxable Income:

  1. You can lower your tax bill by strategically reducing your income.

  2. For example, you can donate to charities, utilize investment or insurance loan/LOC, or purchase practice equipment to claim capital cost allowance.

  1. Salary/Dividend Splitting:

  1. You can optimize your income mix for tax efficiency by balancing salary and dividends.

  2. Salary provides RRSP contribution room and CPP benefits, while dividends are taxed at lower rates and eligible for the dividend tax credit.

  1. Consult with Professionals:

  1. We are here to assist you with your tax planning needs.

  2. We specialize in personal and professional corporation taxes for dental practices.

  3. We can help you navigate complex rules and regulations with ease.

  4. We are impartial in selecting the most suitable investment and insurance vehicles for you, as we are not employed by specific banks, investment or insurance companies. We stand by your best interests. 

We invite you to contact us to discuss these strategies and more. We look forward to assisting you in achieving your financial goals.

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