Capital-Gains Tax Hike Stirs Concern Among Canadian Doctors
In the wake of the federal government’s proposed tax reforms, the medical community is bracing for a substantial financial impact. The Canadian Medical Association (CMA) has voiced concerns that the increase in capital-gains taxes could significantly affect doctors’ finances, potentially prompting some to abandon their practices.
Under the new budget, the capital-gains inclusion rate is set to rise to two-thirds from the previous one-half. This adjustment means a higher portion of income from the sale of assets, such as stocks or property, will be subject to taxation. While individuals will see the first $250,000 of capital gains taxed at a 50 percent rate, corporations will face the 67-percent rate from the first dollar of capital gains.
Most physicians operate their practices as small businesses through medical professional corporations, making them particularly vulnerable to shifts in capital-gains legislation. In 2017, it was estimated that 66 percent of physicians practiced through such corporations.
Dr. Kathleen Ross, CMA president and a family physician in British Columbia, highlighted the strain on physicians who are already grappling with high patient volumes and limited funding. “This really is one more financial hit to an already beleaguered and low-morale profession,” she remarked.
A CMA survey from 2021 revealed a decline in doctors’ mental health during the pandemic, with less than half reporting that they were “flourishing,” a significant drop from 2017 figures. The stress was particularly acute among doctors in remote areas and those early in their careers.
David Burnie, a certified financial planner, explained that incorporating allowed doctors to defer taxes and potentially lower their overall tax burden. However, the proposed changes to capital-gains taxes would affect doctors when selling investments within their corporations or transferring ownership of their practices.
To mitigate some effects, the government is raising the lifetime capital-gains exemption on small-business shares to $1.25 million and introducing other relief measures for small businesses—though not for professional corporations.
The CMA is advocating for medical professional corporations to be exempt from these capital-gains changes, emphasizing that retirement savings, often held within the corporation, will suffer the most.
Ontario Premier Doug Ford and the province’s medical association have also expressed concerns about the tax measures. In response, Katherine Cuplinskas, a spokesperson for Finance Minister Chrystia Freeland, stated that the adjustments aim to create a more equitable tax landscape across different income types.
