Insights – Taxes for Medical Doctors.
Keeping an eye on Canadian tax and business developments for Medical Doctors.
2025 RRSP contribution deductions and tax deferred income
The deadline to contribute to your Registered Retirement Savings Plan (RRSP) and claim a deduction on your 2025 personal income tax return is March 2, 2026. RRSP contributions reduce your taxable income in the year claimed, while investment earnings inside the plan accumulate on a tax-deferred basis. In practical terms, an RRSP provides two benefits: an immediate tax deduction and tax-deferred growth on investments held within the plan.
Your deductible RRSP contribution is based on your available contribution room. For the 2025 tax year, the maximum contribution limit is the lesser of 18% of your prior year’s earned income (generally employment and self‑employment income) or $32,490, plus any unused contribution room carried forward from previous years. Your personal RRSP deduction limit is reported on your 2024 Notice of Assessment and can also be viewed through CRA My Account. It is important to confirm your available room before contributing, as excess contributions beyond your limit (other than the $2,000 lifetime buffer) may be subject to a 1% per month penalty tax until corrected.
Taxes Payable by Individuals at Various Income Levels — Ontario 2025
If you are a Canadian resident, you are taxed on your worldwide income from your employment, self-employment - professional income, and income or taxable capital gains from any investments or property you may own. You are not taxed on gifts you receive and certain miscellaneous types of income. If your income is sourced in another country, you will normally receive a tax credit in Canada to avoid double taxation.
Not all income is treated equally. For example, only 1/2 of capital gains are included in income. Most Canadian source dividends qualify for the gross-up and dividend tax credit mechanism that reduces the tax payable on the dividends for resident individuals. Certain employment benefits are received free of tax. Employee stock option benefits are currently one-half taxed in most cases.
Timing affects all revenue and expense items, professional income is generally taxable on an accrual basis, employment income when received, and capital gain and losses when realized or sold. The reporting of professional income is often a confusing concept for medical doctors since under the accrual method, you report income you earn during the calendar year, no matter when you receive it.
Personal Income Tax Brackets – Ontario 2025
Canada’s income tax system levies federal and provincial taxes on individuals. Canada uses a progressive (graduated) income tax system where your earnings are taxed at higher rates (tax brackets) as your income increases. Tax brackets determine the rate of tax paid for each additional dollar of income within the defined bracket/threshold. Those with lesser incomes pay a lesser percentage of taxes on the income earned in lower tax brackets, while those earning higher incomes in higher tax brackets have to pay a higher rate of tax.
In addition to federal income tax, provincial taxes are imposed by the province or territory in which you reside or carry on business or professional activities. Therefore, a physician working in multiple provinces or territories will be required to allocate their professional earnings between the various provinces or territories. Provincial tax rates, tax brackets, and credits vary by province and are calculated using the taxable income calculated under federal income tax rules on schedules accompanying the T1 Individual tax return.
GST/HST Tax Update: MedSleep and Physician–Clinic Fee Sharing Arrangements
A recent decision of the Tax Court of Canada provides important clarification for physicians and medical clinics operating under fee-sharing and cost-sharing models. In MedSleep Inc. v. The King (2025 TCC 70), the Court considered whether arrangements between a clinic and physicians resulted in taxable administrative services or exempt medical services for GST/HST purposes. The decision is particularly significant given the potential GST/HST cost exposure for physicians who provide exempt medical services and are not entitled to claim input tax credits.
Under the Excise Tax Act, the provision of a medical service by a physician is generally an exempt supply. Physicians therefore do not charge GST/HST on their professional services and typically cannot recover GST/HST paid on inputs. The CRA’s concern in MedSleep was that the clinic was providing taxable administrative services—such as office space, utilities, administrative support, and billing services—to physicians, rather than jointly providing medical services to patients. If accepted, this characterization would have resulted in unrecoverable GST/HST costs for physicians.