The type of expenses that can be claimed when starting to practice as a self-employed physician are greatly expanded from those allowed as a medical resident earning employment income.  In general, a self-employed physician may deduct all of the ordinary and necessary expenses of carrying on their medical professional activities unless an exception applies.  The expenses must also be reasonable in the circumstances. The following list is a summary of the most common types of expenses when starting to practice as a self-employed physician:

  • Annual membership fees: Membership fees paid to provincial and other professional associations/societies/professional groups are deductible (e.g., the OMA/CMA, CPSO, Royal College, College of Family Physicians, and other annual membership dues to Canadian and foreign associations).
  • Salaries and contract/consultant fees: Salaries or contract fees paid to family members or third parties for work related to your medical practice (e.g., secretarial, associates, nursing, assistants, bookkeeping, or billings agents) are deductible. This should relate to services that are performed with consideration of the duties and the skills required. These will generally vary depending on the nature/type of practice and degree of support provided by the clinic/hospital. The type of duties may include billing/collections, secretarial/administrative, payroll, accounting and bookkeeping etc.
  • Office rent/maintenance: Rent and related running expenses for business premises are deductible (eg. property taxes, light, heat, insurance, repairs, capital cost allowance, and mortgage interest). If a professional has their office in their home, they may deduct expenses applicable to the portion of the house that it is being used for professional purposes.
  • Automobile expenses: These can be claimed by a professional who uses their car for professional purposes. However, this does not include driving to and from work. If a professional uses their car partly for their profession, then proportional allocation for each expenditure will be calculated for tax deduction purposes.
  • Expenses for education courses and conventions: Expenses of attending up to two conventions are year in connection with your medical professional activities are deductible. In addition, the rules only allow for the deduction of a convention at a location consistent with the territorial scope of the sponsoring organization. Local continuing medical education (CME) courses are deductible and not subject to the limitation of two conventions per year.  These courses are generally to retain status as a member according to the provincial physician college rules or to maintain or improve the skills required in the practice of medicine.
  • Business gifts and meals/entertainment Expenses: Gifts  and entertainment expenditures can be claimed to the extent it reflects a business purpose and are reasonable in the circumstances.   Occasional meals with partners/staff, other physicians, and referral sources may be deductible where professional matters are discussed.  These may include general office matter, scheduling, treatment procedures, and possible alternative therapy with physicians.
  • Insurance premiums:Insurance premiums paid for malpractice insurance, property insurance, and overhead are deductible.
  • Startup costs and fees to acquire an existing practice: The costs of obtaining a license to practice under provincial laws, medical licensing exams and related prep courses and costs to acquire an existing medical practice are deductible or treated as eligible capital expenditures (e.g. depreciated and claimed at 5% per year).
  • Medical books: The cost of books held at the time you start to practice and additional books acquired over time are deductible or treated as capital costs (e. depreciated at 20% per annum).
  • Capital items: The purchase of capital items including office furniture, computers, medical instruments, automobiles, office buildings, and leasehold improvements are not deducted in the year but subject to depreciation.  The depreciation on these assets is claimed and deductible over a period of time.
  • Miscellaneous expenses:Other expenses may include telephone/internet, postage and office expenses, medical/surgical supplies, journals/periodical/subscriptions, uniforms/scrubs, legal/accounting fees, advertising, travel.

Thanks to Janvi Suresh, the University of Waterloo for providing her insights on professional's deductions.   Please get in contact with us at [email protected] for further details. Elliott Stone, CPA, CA, is the founder of MD Tax Physician Services in Toronto.

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