GOOD NEWS

  • Canadian Dental Care Plan (CDCP) – No changes/cuts to CDCP.
  • Underused Housing Tax (UHT) – The government proposes to eliminate the UHT effective 2025. The UHT previously required certain real estate owners to file a UHT return and pay a tax on vacant and/or underused real estate properties.
  • Luxury tax on vehicles, vessels and aircrafts – The government proposes to eliminate the luxury tax on aircrafts and vessels (planes and boats). The luxury tax will still apply to vehicles (Cars, Trucks, SUVs) that cost over $100,000.
  • Automatic tax filing – The government proposes to allow Canada Revenue Agency (CRA) to file a simple tax return for lower income individuals.
  • No changes to personal or corporate income tax rates.
  • Lifetime Capital Gains Exemption (LCGE) – The lifetime limit will remain at $1,250,000 for sale of shares of qualifying corporations (DPCs, HSCs, TSCs). This will be indexed to inflation in 2026.
  • No changes to taxation of capital gains. The capital gains inclusion rate will remain at 50%.
  • Filing of trust income tax returns for bare trusts has been deferred. No trust returns need to be filed for 2025 but will be required for 2026 calendar year (to be filed by March 2027).

BAD NEWS

  • Home Accessibility Tax Credit – Currently, home renovation expenses incurred to improve accessibility for seniors and/or those who qualify for the Disability Tax Credit may be eligible for both the Home Accessibility Tax Credit and the Medical Expense Tax Credit. For 2026 and later, the government proposes to restrict the Home Accessibility Tax Credit such that the expenses claimed for the Medical Expense Tax Credit will not be eligible for the Home Accessibility Tax Credit.
  • Deficit – Government proposes to spend $78 billion more than what they take in from tax revenue. This will add to the national debt and it will be over a decade since the last surplus in 2015.

What does this mean for you?

  • No news is good news. There are no significant changes for dentists in this budget.
  • With a large deficit, it would not surprise us if changes to government benefits such as CDCP, Canada Child Benefit and/or Old age security were made in the future.

 What can I do?

  • If you are already accepting CDCP patients, continue to do so and balance bill. If you are not enrolled in CDCP, reconsider the pros and cons for your specific situation while the program is still active and funded.
  • If you are concerned about future tax increases due to the deficit, consider:
    • Claiming the LCGE now, while still owning your practice
    • Multiply the LCGE by adding family members as shareholders of your PCs/HSCs/TSCs. Each LCGE is worth total tax savings of about $330,000.
    • Reducing discretionary expenses and using that money to invest in your practice, in your dental building, in continuing education and in your RRSP/TFSA/non-registered accounts etc. Appreciation in investments trigger capital gains which face half the tax rate compared to salary/business income.

What will my personal tax bill be for 2025?

PERSONAL TAX TABLE

Self-Employed Taxable Income ($000’s)

 Estimated Taxes

Including Ontario Health Premium ($000’s)
20 <1
30 2
40 5
50 7
60 9
70 11
80 14
90 17
100 20
150 40
200 63
250 87
300 114
400 167
500 221
1,000 488

*In addition to the above, add CPP (maximum $8,860) if you are self-employed.

CORPORATE/BUSINESS:

What will your corporate tax bill be?

Taxable Income ($) 2025 Combined Federal & Ontario Tax Rate (%)
Up to $500,000 Between 12.2% and 18.2%
500,000+ 26.50%

 

*Subject to reduction of small business deduction based on passive income earned by the corporation or any associated corporation.  If annual investment income is under $50,000, the 12.2% rate should apply.

Applies to active business income of a Canadian Controlled Private Corporation (CCPC) i.e., Dentistry Professional Corporation (DPC), Hygiene/Technical Service Corporation (H/TSC).

Different types of corporate investment income are taxed at different rates. A portion of the corporate taxes paid on investment income can be recovered when taxable dividends are paid to shareholders.

Type of Investment Income Tax Rate Recoverable Taxes Paid Net Tax
Interest/rental 50.17% 30.67% 19.50%
Capital gains 25.08% 15.33% 9.75%
Dividends 38.33% 38.33% 0.0%

 

This summary was prepared by DCY Professional Corporation Chartered Professional Accountants who have been advising dentists/doctors for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail david@dcy.ca, basil@dcy.ca, louise@dcy.ca, eugene@dcy.ca. Visit our website at: www.dcy.ca. This article is intended to present tax saving and planning ideas and is not intended to replace professional advice.