From Resident to Staff Physician: A Tax Checklist for Your First Year in Practice (Ottawa CPA Guide)
New staff physician billing OHIP? Ottawa CPA Majdi Ibrahim explains instalments, CPP, deductions, GST/HST, and incorporation timing.
By Majdi Ibrahim, CPA | Majdi Ibrahim, CPA Professional Corporation | Ottawa, Ontario
Finishing residency and starting as a staff physician is one of the biggest financial transitions in a medical career — and it happens fast. One month you're a T4 employee with tax deducted at source, a predictable paycheque, and benefits handled by the hospital. The next, if you're billing OHIP fee-for-service, you're effectively running a small business — without anyone necessarily telling you that's what just happened.
I work with a number of physicians transitioning from residency to staff practice, and the same questions come up again and again: Do I need to incorporate right away? What do I do about tax instalments? What can I actually deduct? Why does my accountant keep asking about CPP? This is one of the first things I'd want a new staff physician to understand: the tax problem isn't that OHIP pays late — it's that nobody is withholding tax for you anymore.
This article is the checklist I wish every new staff physician got handed on day one. It won't replace a real conversation with an Ottawa physician CPA — but it will help you understand what's coming, what to track from the start, and what decisions can wait.
At a Glance: What Changes When You Start Billing OHIP
No more automatic tax withholding. As a resident, tax was deducted from every paycheque. As a fee-for-service physician, OHIP pays you the billed amount — no tax withheld. You're responsible for setting aside and remitting your own tax.
You're now "self-employed" for tax purposes — even before any decision about incorporation. Your OHIP billings are business income, and many of your practice-related costs become deductible expenses.
CPP changes too — and in 2026, it's not just the regular CPP rate. High-income physicians may also owe CPP2 on a second tier of earnings.
Most OHIP billings are GST/HST exempt — but that comes with its own wrinkle, covered below.
Incorporation becomes a live question — but usually not an urgent one in year one, especially if you're carrying medical school debt. More on timing below.
First Things First: Set Up Separation Between Business and Personal
Before anything else, the single most useful thing you can do in your first weeks of practice is open a separate bank account for your OHIP billings and practice-related expenses — even if you haven't incorporated and aren't sure if you will.
Why this matters:
- It makes tracking income and expenses dramatically easier — for you, and for whoever does your bookkeeping
- It avoids the mess of trying to separate personal and business transactions from a single account at tax time
- If you do incorporate later, having clean records from day one makes that transition smoother
A separate bank account sounds basic, but it can save hours of cleanup later — and it's the single biggest factor in how painful (or painless) your first tax season as a physician turns out to be.
Understanding Tax Instalments
This is the part that catches almost every new staff physician off guard.
As an employee, your hospital or health authority withheld tax from every paycheque and remitted it to CRA on your behalf. As a fee-for-service physician, nobody withholds anything. OHIP pays you the full billed amount, and the tax on that income is entirely your responsibility.
CRA's response to this is the instalment system. In general, instalments may be required if your net tax owing exceeds $3,000 in the current year and in one of the two previous years (the threshold works a bit differently in Quebec, but that's outside the scope of this article). When instalments apply, they're generally due on March 15, June 15, September 15, and December 15.
The trap for new physicians: your first year of billing often won't trigger instalments yet, because the requirement looks at your prior years — and your prior year was a T4 residency salary with tax already withheld. The surprise isn't just the first tax bill. It's that instalments for the next year can start around the same time — meaning you may be paying off last year's full balance while also prepaying a chunk of this year's tax.
What to do about it: the practical solution is to set aside a percentage of every OHIP payment as it comes in — into a separate savings account, ideally — so that when the bill arrives, the money is already there. What percentage depends on your income level, but this is exactly the kind of number a CPA can help you estimate early, rather than guess at later.
CPP: You Now Pay Both Sides — and CPP2 Matters in 2026
As a resident, CPP contributions were deducted from your paycheque, and your employer matched that amount — split roughly down the middle between you and the hospital.
As a self-employed physician, CPP is calculated on your net self-employment income — billings minus eligible expenses, not gross OHIP billings — and you pay both the employee and employer portions. For most physicians, that's a combined rate of 11.9% on income up to the first earnings ceiling.
For high-income physicians, CPP is not a rounding error in 2026. The CPP enhancement is now fully in place, including a second earnings ceiling — commonly called CPP2. For 2026, the first earnings ceiling (YMPE) is $74,600, and the second ceiling (YAMPE) is $85,000. On income between those two amounts, self-employed individuals pay an additional CPP2 contribution at a combined 8% rate.
In practical terms: a physician with net self-employment income above $74,600 isn't just paying the regular self-employed CPP maximum — they're also paying CPP2 on the next tranche of income up to $85,000. The practical point is that high-income new physicians need to set aside cash for tax and CPP, not tax alone.
This is also one of the considerations that comes up later when thinking about incorporation and how to pay yourself — but in year one, the main thing to know is simply that it's coming, and it's connected to your net income.
What You Can Now Deduct
Once you're billing OHIP as a fee-for-service physician, a range of practice-related costs become deductible against your billings — costs that, as a resident, you may have paid for personally with no tax benefit. Keeping receipts and records for these from day one matters.
Professional dues and fees:
- CPSO (College of Physicians and Surgeons of Ontario) membership fees
- OMA (Ontario Medical Association) membership
- Specialty society memberships
- CMPA fees — see the important note below
Continuing medical education (CME):
- Course fees, professional education, journal subscriptions, and textbooks related to your practice
- Conference and convention costs — see the note on convention limits below
- Travel and accommodation associated with CME (subject to the usual rules on reasonableness, and partial limits on meals)
Practice-related costs:
- Office space, if you're renting or have a dedicated home office used for practice administration
- Medical equipment and instruments
- Locum coverage costs you pay to other physicians (if applicable)
- Administrative support — billing services, transcription, a part-time assistant
Vehicle and travel:
- Travel between practice locations may be deductible — see the mileage log note below
Technology and communication:
- Business-use portion of your cell phone and internet
- Software used for scheduling, billing, or practice administration
This isn't an exhaustive list, and not every item applies to every physician — a hospitalist with low overhead but high instalment exposure looks very different from a family physician joining a clinic with significant overhead deductions. But the general principle holds: costs that are reasonably related to earning your professional income are worth tracking from day one, even if you're not sure yet whether they'll be claimed personally or, eventually, through a corporation.
The CMPA Rebate Trap: Don't Deduct the Gross Amount Blindly
CMPA fees can be deductible where they relate to earning your professional income — but in Ontario, this comes with a wrinkle that's easy to miss.
Ontario physicians may receive a Medical Liability Protection reimbursement covering a significant portion of CMPA fees. The mistake isn't paying CMPA fees — it's deducting the full fee and forgetting that a large portion may have been reimbursed.
In practice, this generally means one of two things: deduct only the net, non-reimbursed portion of your CMPA fees, or — if you deduct the gross amount — make sure the reimbursement is properly reported as income or otherwise accounted for. Either approach can work, but claiming the gross fee while ignoring the reimbursement overstates your deductions and creates exactly the kind of mismatch CRA can flag.
The fix is simple: keep your CMPA statement, proof of payment, and reimbursement statement together, so whoever prepares your return has the full picture.
CME Is Usually Worth Tracking, But Conferences Aren't a Blank Cheque
Course fees, professional education, journals, and textbooks connected to your practice income are generally good candidates for deduction. Conferences and conventions, though, come with their own rules — CRA generally limits deductible convention expenses to up to two conventions per year, subject to certain conditions, and meals at those conventions are subject to the usual partial deduction limits.
CME is usually worth tracking, but conferences are not a blank-cheque deduction. Keep the agenda, the receipts, and proof of attendance — so the professional purpose of the trip is clear if anyone ever asks.
GST/HST: OHIP Billings Are Usually Exempt, But Watch Other Income
This is one area many physician tax guides skip — and it's worth understanding even in year one.
Standard clinical services billed to OHIP are generally exempt from GST/HST. That means physicians generally don't charge HST on OHIP-insured clinical services — which sounds like good news, and in one sense it is. But exempt isn't the same as zero-rated, and the difference matters.
Because exempt supplies generally don't give rise to input tax credits (ITCs), physicians usually can't recover the HST they pay on expenses used to earn that exempt OHIP income. HST paid on office rent, software, equipment, billing services, accounting fees, and other overhead becomes a real cost rather than a recoverable tax credit — which quietly increases the effective overhead cost of running a practice.
Non-OHIP income may be a different story. Items worth reviewing for GST/HST treatment include:
- Cosmetic or non-medically-necessary services
- Third-party medical-legal reports
- Insurance forms and administrative forms
- On-call or availability stipends
- Other non-OHIP services
This doesn't mean all of these are automatically taxable — GST/HST treatment depends on the nature and purpose of the specific supply, and each of these categories should be reviewed on its own facts. The practical point is simple: most OHIP billings aren't a GST/HST collection issue, but a physician with material non-OHIP or third-party income may need to look at whether GST/HST registration applies. In general, registration becomes a question once taxable supplies exceed $30,000 in a single calendar quarter or over four consecutive calendar quarters — not something most new physicians need to worry about immediately, but worth keeping in mind as non-OHIP income grows.
OHIP Billing Realities: Why Your Income Isn't Always What It Looks Like
A few OHIP-specific quirks are worth understanding early, because they affect both your cash flow and your record-keeping.
Billing lag. There's typically a delay between providing a service and receiving payment from OHIP — sometimes a month or more. This means your cash flow in any given month doesn't necessarily match the work you did that month, which matters when you're trying to set aside money for taxes based on what's coming in.
Reconcile deposits to remittance advice. Your bank deposit tells you what arrived. Your OHIP remittance advice explains why it arrived, what was adjusted, and what still may need follow-up. Relying only on bank deposits as "income" misses adjustments, rejections, resubmissions, and holdbacks — all of which show up in the remittance records but not always clearly in your bank feed.
Group billing arrangements. If you're part of a group practice with a shared billing number or cost-sharing arrangement, your "income" may be a net amount after shared overhead is deducted. Track the group's deductions and your share separately from gross billings where possible — and clarify the structure with whoever handles your taxes, especially in year one.
Form T2125: Where This All Lands If You're Unincorporated
If you remain unincorporated, your professional income and expenses are generally reported on Form T2125 (Statement of Business or Professional Activities), filed with your personal T1 tax return. Everything covered above — OHIP billings, CPSO/OMA/CMPA fees, CME, vehicle expenses, and so on — flows into this form. It's the practical anchor for your first few years of tax filing, before (or instead of) any incorporation decision.
Should You Incorporate Right Away?
Short answer: usually not in year one — but it's worth understanding the landscape early, because the decision tends to come up again soon.
Physicians in Ontario can incorporate through a Medicine Professional Corporation (MPC). The core tax analysis — deferral on income left inside the corporation, integration, the small business rate — works the same way it does for any incorporated business, but with CPSO rules layered on top.
The Key Question Isn't "Am I Earning More?" — It's "What Can I Actually Leave Inside?"
The main tax benefit of an MPC is usually deferral on income left inside the corporation. That benefit depends entirely on how much surplus you actually have after personal needs are covered.
Many new staff physicians carry substantial medical school lines of credit. If most or all of your income needs to go toward living costs, taxes, and paying down that debt, there may be little or nothing left to retain inside a corporation — which means little or no deferral benefit in year one. For new physicians with large medical school debt, incorporation is often less urgent than people assume, because the corporation adds setup costs, CPSO steps, bookkeeping, and a separate corporate tax return without much offsetting advantage if every dollar is going out the door anyway.
If, on the other hand, you'll be retaining meaningful surplus cash inside the corporation — a busy specialty with a full roster from day one, or debt that's already well managed — the incorporation conversation becomes more relevant sooner.
The CPSO Authorization Timing Matters
One more practical point: a Medicine Professional Corporation isn't something to clean up retroactively after the fact — timing matters. CPSO requires a Certificate of Authorization before the professional corporation is authorized to practise or hold itself out as a Medicine Professional Corporation, and that certificate isn't backdated. You shouldn't assume billings can simply be moved into a corporation before the structure has been properly authorized — this is exactly the kind of thing that needs CPA and legal coordination ahead of time, not after.
Once Incorporated: Salary vs. Dividends Becomes Its Own Question
If and when incorporation does happen, how the corporation pays you — salary, dividends, or a mix — becomes a separate, ongoing planning conversation. Briefly: salary creates RRSP room and CPP contributions, while dividends are simpler administratively but don't create either. The right mix depends on your cash needs, debt repayment plans, retirement goals, and how much the corporation is retaining. This isn't a year-one decision, but it's worth knowing it's coming.
The Bottom Line
The honest answer for most new staff physicians: get through year one with good records and a clear picture of your actual income and expenses, then revisit incorporation with real numbers — rather than guessing in advance. Setting up good record-keeping habits now can also make a future incorporation or Section 85 rollover smoother, where one is needed.
A First-Year Checklist
Here's a condensed version of everything above, as a practical checklist for your first months in practice:
- Open a separate bank account for OHIP billings and practice expenses
- Set aside a percentage of each OHIP payment for tax and CPP — even before you know the exact percentage, something is better than nothing
- If your income is likely to exceed $74,600 net, remember CPP2 may apply on the next tranche up to $85,000 (2026 figures)
- Track practice-related expenses from day one — CPSO, OMA, CME, equipment, professional development
- Keep your CMPA payment record and your Ontario reimbursement statement together — don't deduct the reimbursed portion twice
- Keep agendas and receipts for CME conferences and conventions
- Maintain a mileage log if you travel between practice locations — and don't count regular commuting as business travel
- Reconcile OHIP deposits against remittance advice reports — track adjustments, rejections, resubmissions, and holdbacks
- If you're in a group practice, clarify how shared billing and overhead deductions affect your reported income
- If you have material non-OHIP or third-party income, ask whether GST/HST registration applies
- Understand that if unincorporated, this all lands on Form T2125 with your T1
- Have an early conversation about incorporation timing — factoring in cash retention, medical school debt, and CPSO authorization requirements
A Note on Vehicle and Travel Claims
Worth flagging on its own: driving from home to your regular hospital or clinic is generally personal commuting, not a deductible expense — the same rule that applies to any taxpayer. Travel between practice locations (say, a clinic in the morning and hospital rounds in the afternoon) may be deductible, but it needs to be supported properly.
A mileage log matters. "I drove a lot for work" is not the same as a supported business-use claim. The log should show the date, destination, purpose, and kilometres for each trip — recorded as you go, not estimated casually at year-end.
Ottawa & Area: Where New Physicians Often Practice
The fundamentals above apply regardless of location or specialty, but the practice setting changes the specifics. A hospitalist typically has low overhead but real instalment exposure once a full year of billings catches up. A family physician joining a clinic in Kanata often has overhead deductions — rent, staff, equipment — that a hospitalist doesn't. A locum physician moving between sites needs especially careful mileage and remittance tracking, since income can come from multiple billing arrangements at once. A specialist with significant CMPA fees and CME costs has more to track on the deduction side. And a physician earning meaningful non-OHIP income — third-party reports, cosmetic procedures — is the one most likely to need a GST/HST conversation early.
In Orléans, family health teams and new clinics see a steady stream of physicians making this exact transition every year — often fresh out of residency at uOttawa, starting hospital privileges, or joining an existing group practice.
What Happens When You Bring This to Majdi Ibrahim, CPA?
A first-year setup conversation, not just a year-end filing. We talk through your practice setup — billing structure, expected income, group arrangements if applicable — early, so your record-keeping is set up correctly from the start rather than reconstructed later.
A realistic estimate for tax and CPP set-asides. Rather than guessing, we help you estimate roughly what to set aside from each OHIP payment — including CPP2 if your income is likely to be high enough for it to matter — so the first tax bill isn't a shock.
Help navigating instalments. We explain how and when instalments are likely to start, and help you plan for them rather than be surprised by them.
An honest read on incorporation timing. The question isn't just "can I incorporate?" — it's whether the corporation actually helps based on what you need to take home personally, including any medical school debt. If incorporation makes sense early, we'll say so. If it makes more sense to wait and revisit with real numbers, we'll say that too.
Ongoing support as your practice evolves. Whether your practice grows quickly or takes time to ramp up, the goal is for your tax situation to keep pace with your actual circumstances — not be figured out retroactively every April.
Frequently Asked Questions
Do I need to incorporate as soon as I start billing OHIP?
No. Incorporation is rarely urgent in year one, and the benefit depends mainly on how much income you can actually leave inside the corporation rather than withdraw personally. If you're carrying significant medical school debt and need most of your income to cover living costs, taxes, and debt repayment, there may be little year-one benefit. It's still worth an early conversation so the decision isn't made under time pressure later — and so the CPSO Certificate of Authorization timing doesn't catch you off guard if you do decide to incorporate.
Why didn't I owe tax instalments in my first year, and why might I owe them now?
CRA generally requires instalments when your net tax owing exceeds $3,000 in the current year and in one of the two previous years (instalment due dates are March 15, June 15, September 15, and December 15). In your first year of fee-for-service billing, your prior year was likely a T4 residency salary with tax already withheld, so instalments for that first year typically weren't triggered. Once CRA sees a full year of unwithheld self-employment income, instalments for the following year often do get triggered — sometimes arriving at the same time as your first large tax bill.
Do physicians charge HST on OHIP billings?
Generally no — standard OHIP-insured clinical services are exempt from GST/HST, so most physicians don't charge HST on those billings. The wrinkle is that exempt supplies generally don't allow input tax credits, so HST paid on practice overhead (rent, software, equipment, and similar costs) usually can't be recovered. Non-OHIP or third-party income — cosmetic services, medical-legal reports, insurance forms — may be treated differently and is worth reviewing if it's a material part of your income. As a general rule, GST/HST registration becomes a question once taxable supplies exceed $30,000 in a single calendar quarter or over four consecutive quarters — not an immediate concern for most new physicians, but worth knowing as non-OHIP income grows.
Can I deduct my full CMPA fees?
Not without accounting for the Ontario reimbursement. Ontario physicians may receive a Medical Liability Protection reimbursement covering a significant portion of CMPA fees, so the deduction should generally reflect either the net, non-reimbursed amount, or the gross amount with the reimbursement properly reported as income. Keep your CMPA statement and reimbursement statement together so this is easy to sort out at tax time.
How much should I be setting aside from each OHIP payment for taxes?
It depends on your income level and expenses — there's no single percentage that applies to everyone, and in 2026, high-income physicians should factor in CPP2 (an additional self-employed CPP contribution on net income between $74,600 and $85,000) on top of regular tax and CPP. The point of setting something aside from the start is to avoid the shock of a large, unanticipated bill; the exact percentage is worth estimating early with a CPA based on your actual numbers.
Should I incorporate if I still have medical school debt?
It depends on how much of your income you'd need to withdraw personally. The main benefit of a Medicine Professional Corporation is usually tax deferral on income retained inside the corporation — if most or all of your income needs to go toward living costs, taxes, and paying down a medical school line of credit, there may be little left to retain, and therefore little year-one benefit. This doesn't mean incorporation is off the table permanently — it just means the timing should be based on your actual cash flow, not a general assumption that incorporating earlier is always better.
Do I report OHIP income on my personal tax return?
If you remain unincorporated, yes — your professional income and expenses are generally reported on Form T2125 (Statement of Business or Professional Activities), filed along with your personal T1. This includes your OHIP billings as income and your eligible practice expenses as deductions.
I'm part of a group practice with shared billing — does that change anything?
It can. How your income is reported, and what expenses are deducted before you receive your share, depends on the specific structure of the group arrangement. This is worth clarifying early with whoever handles your taxes, since "your income" in a group practice isn't always as simple as "what OHIP paid out under your billing number."
Can I deduct continuing medical education (CME) costs?
Generally, yes — course fees, professional education, journals, and textbooks connected to your practice income are typically deductible. Conferences and conventions have their own rules, though: CRA generally limits deductible convention expenses to up to two per year, subject to certain conditions, and meals at conventions are subject to the usual partial deduction limits. Keep the agenda and receipts so the professional purpose is clear.
What's the single most useful thing I can do in my first month of practice?
Open a separate bank account for your OHIP billings and practice expenses. It sounds small, but it's the foundation for almost everything else — clean records, easier tax preparation, a smoother eventual transition to incorporation if that happens, and far less stress reconstructing a year of mixed personal and business transactions at tax time. For a Barrhaven family physician setting up a new clinic, this is often the very first administrative task worth doing — before the first patient is even booked.
Let's Set Up Your First Year Properly
Starting as a staff physician is a major transition — and getting the financial side set up correctly from the start makes a real difference, both for your first tax season and for decisions down the road.
Majdi Ibrahim, CPA works with physicians transitioning from residency to staff practice, through to established practices considering incorporation as a Medicine Professional Corporation.
Book a consultation at www.treehousecpa.com
Whether you're a few weeks into practice or just planning ahead, you'll leave with a clear picture of what to expect.
This article is provided for general informational purposes only and does not constitute personalized tax, legal, or financial advice. Tax rules are subject to change. Please consult a CPA for advice specific to your situation.
