Tax Considerations for Medical Students and Residents

Rishi Kapadia, CPA - Mar 03, 2021
Unique tax considerations for medical students, residents, and fellows for 2021!

As you progress through medical school and residency, one key area that often gets overlooked is financial planning. A key component of financial planning is ensuring that you appropriately file your tax return incorporating several tax-saving strategies.

The following are some of the strategies to consider:

Interest on Student Loan:

Current and former students can claim 15% non-refundable federal tax credit in 2020 for interest paid on student loans. The credit can be used in the year the interest is paid or in any of the five preceding years. Loans must be from Canada Student Loan Program or from respective provincial student loan programs. Private loans or loans from a financial institution do not qualify for the federal tax credit.

Moving expenses:

If you’re moving as a student, resident, or even as a staff physician, you can claim moving expenses. To claim moving expense, both criteria below must be met:

  • You must be moving for work or to attend a full-time post-secondary program
  • Your move must be 40 kilometers closer to your new place of work or school

You can deduct the expenses from your earnings as well as from scholarships, fellowships, and research grants. Some of the moving expenses that are deductible include reasonable travel costs (including meals and lodging), cost of moving household effects and other personal property, lease cancelation costs, and cost of selling an old home.

Student fees tax credit:

Tuition fees paid for post-secondary education qualify for a non-refundable 15% federal credit. You may be able to transfer the tuition fees paid to your spouse or to a parent, or you can carry forward any unused tuition credit amounts and claim them against future taxable income.  You can transfer up to $5,000 in unused student credit, which is equivalent to $750 (15% of $5,000) in tax savings.

Scholarship and Bursaries:

Scholarship, fellowship, or bursary income received from a qualifying educational program that you are enrolled in as a full-time student is tax-free. However, if you receive a scholarship, fellowship, or bursary income as a result of a part-time program, the tax-free exemption is limited to the cost of tuition. Post-doctoral fellowships do not qualify for a tax-free exemption.

Professional dues:

Your status as a medical student, resident, or staff physician will allow you to deduct professional dues including but not limited to Ontario Medical Association (OMA) dues, Canadian Medical Protective Association (CMPA) dues, and Professional Association of Residents of Ontario (PARO) dues.  

To learn more about personalized financial planning and how to access free tax return preparation services for medical students and residents by a qualified tax professional, contact us here.

Rishi Kapadia is a Chartered Professional Accountant who works exclusively with physicians and their families. He is the founder of Physicians CPA, a boutique accounting firm dedicated to supporting the tax and accounting needs of physicians.