Introduction

Incorporated medical professionals often assume that expenses paid through the corporation are automatically deductible. In reality, the CRA applies specific rules that focus on business purpose and reasonableness.

Understanding which expenses are deductible through a medical corporation helps avoid denied deductions and shareholder benefit issues.

Key takeaways

Expenses must relate directly to earning income
Personal expenses are not deductible
Mixed-use expenses require reasonable allocation
Poor documentation increases CRA risk

Who this applies to

This applies to incorporated physicians, specialists, and other regulated medical professionals operating through professional corporations.

How deductibility is determined

The CRA requires that expenses be incurred for the purpose of earning income. Expenses that are personal in nature or not connected to medical practice are generally not deductible.

Common deductible expenses

Deductible expenses often include office rent, staff wages, medical supplies, professional dues, insurance, and practice management software. These expenses must be reasonable and properly documented.

Mixed-use expenses

Expenses such as vehicles, home offices, and technology may be partially deductible if a clear business portion can be supported. Personal portions must be excluded.

Common errors

Problems arise when personal costs are paid through the corporation, when allocations are unsupported, or when capital expenses are deducted incorrectly.

Frequently asked questions

Can home expenses be deducted through a medical corporation?
Only the business portion, and only with proper documentation.

Are vehicles deductible?
Only the business portion of vehicle use is deductible.

Does paying through the corporation make an expense deductible?
No. Business purpose determines deductibility.

Closing

Clear separation between personal and professional expenses is essential for medical corporations. Proper classification and documentation reduce audit risk and help ensure deductions stand up to CRA review.