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Should a med student incorporate or wait until residency?


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2 hours ago, billy55555 said:

I'm curious if med students or residents incorporate.

Does it help offset stripend income as a med student?

Does it help offset income received as a resident?

 

 

No, they don’t. It absolutely wouldn’t make sense from a tax perspective unless you have other (much larger) income sources. And since in both cases you’re being hired as a type of employee, I don’t think you could actually claim that income as business income anyways. Incorporation is something you can do as a small business, but you can’t contract out your services as a medical student / resident. 

Edit: see https://www.google.com/amp/s/www.theglobeandmail.com/amp/investing/personal-finance/taxes/article-beware-the-rules-that-apply-to-incorporated-employees/

And

https://invested.mdm.ca/md-articles/is-incorporation-right-for-you

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On 6/9/2021 at 8:16 PM, shikimate said:

Although provincial rules vary, I do not believe you are legally allowed to form a professional corporation, unless you have authorization from the College to practice.

That is correct.

 

You could hypothetically incorporate a non-medical business though and then convert it into a medical one later, however this is more complicated and costly than its worth.

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The point of incorporation is to defer income tax if your income is higher than currently needed for expenses (and to pay business expenses instead of having to deduct them from income tax). It's very likely that unless you're already independently wealthy, the substantial fees for incorporating are not worth it until you make staff income (irregardless that as shikimate says you usually can't without going through your college).

I'm not an accountant but this is how it's been explained to me, anyone feel free to correct me if I'm wrong.

For example if you're not incorporated and you make X a year which is a high income in a high income tax bracket. You pay the high tax bracket and you then can get reimbursed on tax deduction for business expenses (say clinic overhead). If you don't need X per year to live (expenses, rent, vacations etc). You can incorporate. The X salary is paid to the corporation, and the corporation can then pay your overhead, and pay you out a salary Y which may be substantially lower with a lower tax bracket. The remainder can be invested by the corporation, and you only have to pay income tax when you withdraw it from the corporation as salary. So if you keep paying yourself Y, X-Y gets invested, and then when you retire you can keep paying yourself a salary from that accrued remainder (And investment income) and only pay income tax when it comes out.

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