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How physicians are paid in Canada – understanding your pay and deductions. A guide for international medical graduates



If you earned your medical degree in another country and have moved to Canada to practice medicine, you'll need to know how physicians in Canada are paid and what deductions you will and won't have taken from your pay.

If you had to redo your residency after immigrating to Canada, your paycheque as a resident will have looked similar to that of most Canadian salaried employees: a fixed monthly salary, minus deductions for federal and provincial taxes, for the Canada Pension Plan (CPP), and for your Employment Insurance (EI) premiums.

Once you begin practicing, however, the way you get paid will probably look very different. While physicians at Canadian academic institutions, community health centres and hospitals are paid a fixed salary, the majority of physicians practice either solo or as part of a small group, and are considered self-employed. They fall under the fee-for-service model, in which the practice bills their provincial government's Ministry of Health based on how many patients they see and what care they provide.

Sounds complex? It can be, but we're here to help!

Gross salary vs take-home pay

While the fee-for-service model makes it relatively easy for a physician to predict their gross income, that's very much not the end of the story: that gross income needs to cover the rent on your office space, buy and maintain necessary equipment, pay your office and support staff, and keep you up-to-date with your insurance, professional fees, and licensing, as well as covering your own personal expenditures.

And, of course, you're still required to file a tax return and pay income tax. Because you're considered self-employed, no taxes or deductions are withheld from the payments you receive. Instead, you'll be responsible for paying your estimated taxes to the Canada Revenue Agency (CRA) in quarterly instalments, in March, June, September and December, with any outstanding balance due by April 30th of the following year.

In addition, for purposes of calculating CPP, as a self-employed physician you're treated as both employer and employee, and so must pay the full mandatory contribution to the Canada Pension Plan ($6,999.60 in 2022).

There are also are ongoing professional expenses and fees: you'll need to pay for continuing education, for medical licensing exams, and the annual fee for your license to practice.

You'll also need to carry malpractice and property insurance, and may want to carry disability insurance as well, in case you're unable to practice for a period of time. Finally, there are annual membership fees paid to professional associations and societies.

Once all of these expenses are accounted for, you arrive at your take-home, or net, pay.

Overview of deductions

Feeling a bit overwhelmed?

The good news is, as a self-employed physician you're able to deduct, or "write off" many of those expenses, and are eligible to receive a number of tax credits, allowing you to pay less tax!

Let's assume that the average family doctor earns around $310,000 annually from fee-for-service billings and spends approximately $85,000 on the (mostly tax deductible) business expenses we discussed previously — leaving them with a net taxable income of around $225,000.

READ MORE: Tax deductions: What self-employed physicians can claim

Next, we turn to personal deductions: for instance, half of those Canada Pension Plan contributions are deductible (lowering your taxable income) and the other half can be used as a tax credit (lowering your taxes owing).

Self-employed physicians can also reduce their taxes owing by saving for their retirement through tax-deductible contributions to a registered retirement savings plan (RRSP).

And that's just the beginning!

You may also want to consider establishing a medical corporation: incorporation adds some complexity to your financial and tax planning, but potentially offers a number of tax and other benefits, helping you keep more of the money you earn.

READ MORE: Understanding the Canadian tax system: a guide for internationally-trained medical graduates

An MD Advisor* can work with you to build a financial plan in a tax-efficient manner and help you meet your financial goals.

 

*MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.

The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.