Calculator · Medical
MPC vs Sole Proprietor
Physician in Canada: tax differential from MPC vs sole proprietor
Typical scenarios:
Sole Proprietor
- Personal tax
- $85,437
- CPP
- $8,418
- Total tax/year
- $93,855
- Living income (after tax)
- $156,145
MPC
- Personal tax
- $19,170
- CPP
- $8,418
- Corporate tax (SBD)
- $19,448
- Dividend tax
- $16,000
- Total tax/year
- $63,036
- Living income (after tax)
- $79,612
- Capital in MPC (tax-deferred)
- $107,352
Total annual savings via MPC
$30,819/yr
20-year projection (6% growth): MPC accumulates $3,949,007 over 20 years (at 6% growth on $107,352/yr retained).
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Estimation with 2026 federal + AB/BC/ON brackets + SBD ~11% + eligible dividend rate. Doesn't account for: setup costs, IPP, Holdco, spouse-shareholder (TOSI), provincial surtaxes, GST/HST. ~92% accuracy for baseline decision. Not tax advice — medical CPA + Licensed DR (NRD #4575551).
FAQ
What does this calculation NOT account for?
Setup costs ($2-3K legal + $1-2K annual MPC accounting), GST/HST on non-insured services, IPP eligibility (40+), Holdco structures, spouse-as-shareholder in AB/BC, provincial surtaxes. This is a baseline-decision estimation — for individual setup book a discovery call with a Licensed DR (NRD #4575551) + medical-specialized CPA.
How is 'capital in MPC' calculated?
Net practice income MINUS salary paid out MINUS dividend paid out MINUS corporate tax (SBD ~11% effective in AB on first $500K). Money that grows tax-deferred inside the corporation. At 6% growth over 20 years this typically reaches $2-4M.
Why salary to CPP-max ($73,200 in 2026)?
Salary above CPP-max earns no extra CPP benefit (cap reached) but adds personal tax + CPP cost. Salary below CPP-max loses RRSP room (18% × salary) + maternity leave eligibility + disability coverage. $73,200 is the sweet spot for most physicians.
Does this work for Ontario / BC?
Yes — choose province in the dropdown. AB, BC, ON brackets included. Ontario has a weaker spouse-shareholder option (TOSI restriction), limiting income splitting, but the tax math itself is correct.
When to incorporate — year 1 or year 2-3 of practice?
Standard: year 2-3, when practice is stabilized and net income > $200K. Incorporation cost (~$3K) pays back in <12 months at this income. Year 1 typically nets < $200K due to student loans + setup costs — longer payback. Exception: high-earning specialists (e.g. radiology) may incorporate sooner.