North York is home to a large concentration of professional corporations, doctors, dentists, lawyers and consultants who incorporated for the tax deferral. Professional corporations follow special rules, and this post covers what North York professionals need to get right on their T2.
What makes a professional corporation different
A professional corporation is still a CCPC and files a normal T2, but its shares are usually restricted by the governing professional body, which limits who can own them and constrains income splitting. The 2018 tax on split income (TOSI) rules further narrowed the ability to pay dividends to family members, so the classic "sprinkle dividends to a spouse" strategy no longer works for most professionals without meeting specific exclusions.
The deferral advantage still holds
Even without income splitting, the core benefit remains: a professional earning well above what they spend can leave surplus income in the corporation, taxed at roughly 12% on the first $500,000, and defer the personal tax until they draw it out, ideally in lower-income years or retirement. For a high-billing North York specialist, that deferral compounds meaningfully over a career.
Watch the passive-income grind
The deferral creates a second problem: retained profits get invested, and investment income is passive. Once passive income inside the corporation exceeds $50,000 a year, it grinds down the small business deduction, and at $150,000 it eliminates it. North York professional corporations with sizeable investment portfolios need active planning, often an individual pension plan or a holding-company structure, to manage this.
Practice-specific deductions
- Professional dues, licensing and insurance are deductible to the corporation.
- Continuing education required to maintain the licence is deductible.
- Equipment specific to the practice, dental chairs, imaging, IT, runs through the CCA schedule.
- Reasonable salaries to family members who genuinely work in the practice remain valid, unlike dividend sprinkling.
Getting expert help
Professional corporations sit at the intersection of tax law and professional regulation. A T2 for a North York medical or dental corporation is not the place for generic filing; the TOSI exclusions, the passive-income rules and the practice's specific deductions all reward an accountant who works with professionals regularly.