From Lecture Hall to Practice: A Conversation with U of T’s Graduating Medical Class

I had the opportunity to spend some time with the graduating class at the Temerty Faculty of Medicine at the University of Toronto.

It’s a unique moment in their careers. Years of study are behind them. Residency lies ahead. And while their focus remains firmly on medicine, another transition is already underway—one that is rarely addressed in any structured way during a physician’s training. They are about to begin earning income in a meaningful way.

With that comes responsibility. Not theoretical responsibility, but practical responsibility—decisions about tax, operating structure, cash flow, and long-term planning that will shape their financial lives for years to come.

What I aimed to do was not to overwhelm with technical detail, but to provide a framework—something practical, grounded in experience, and immediately useful.

1. The First Transition

Up to this point, most graduates have been students with little or no taxable income. As they enter residency, they become employees. Their income is reported on a T4, income tax, CPP, EI and PARO dues are withheld at source, and the system appears to take care of itself. That simplicity does not last.

Once residency ends, most physicians move into practice as sole proprietors. At that point, income is no longer taxed at source. It must be managed, tracked, and reported by the physicians themselves based on the value of services rendered, not simply what has been collected.

2. What You Will Receive as You Begin Residency—and Why It Matters

As you transition from medical school into residency, you are now an employee of a hospital. This phase is distinct from what comes later in practice and comes with its own set of documents, obligations, and opportunities. Over the course of your first year—and each year during residency—you can expect to receive the following:

**T4 Slip (Issued January/February Each Year)** 

This reports your employment income, along with the income tax, CPP, and EI already deducted from your pay. It forms the basis for filing your personal income tax return.

**T2200 – Statement of Conditions of Employment (Typically Issued Annually)** 

This confirms that you are required to incur certain expenses as part of your employment.

Where eligible expenses are claimed, they can reduce the income on which you are taxed. This means less tax payable and more cash available to you. That additional cash can be used to pay down your line of credit, reduce interest costs, or begin saving toward future goals. A T2200 does not make all expenses deductible. It allows certain claims to be considered, but the Income Tax Act determines what may ultimately be deducted.

**TD1 (and Related Withholding Forms) — Immediate Action Required** 

This form requires your attention right away.

Most graduating medical students have accumulated significant tuition tax credits during university. If these are not properly reflected, your employer will deduct more income tax from your pay than necessary. Completing this form properly reduces tax withheld at source and increases your monthly take-home pay. Practically, this means more cash in your hands now—at a time when many residents are carrying significant balances on their lines of credit and paying interest.

3. Entering Practice as a Sole Proprietor

In Ontario, a physician earning more than $258,482 as a sole proprietor in 2026 will be taxed at a top marginal rate of 53.53% on each additional dollar earned above this amount. By contrast, income earned through a professional corporation may be taxed at 12.2% on the first $500,000 of active business income, assuming access to the small business deduction.

The difference is material.

But incorporation is not automatic. It is a planning decision that depends on income, cash needs, and long-term objectives.

4. A Note on Expenses

An expense is any cost incurred in the course of earning income. Your responsibility is to track these expenditures. My responsibility, as your accountant, is to determine the most tax-efficient way to use those expenses, as permitted by the Income Tax Act.

Not everything is deductible. A speeding ticket incurred on the way to work is not deductible according to the Income Tax Act even though it was incurred to earn income. A substantial clothing purchase—even if it feels necessary professionally—is not deductible. The rules are not always intuitive. That is why organization and discipline in record-keeping and proper advice from a healthcare accountant are essential.

5. A Note on RRSPs and the FHSA When Planning a Home Purchase

If you choose to contribute to an RRSP or a First Home Savings Account, you are not required to claim the deduction immediately. During residency, your income—and therefore your tax rate—is relatively low. Once you enter practice, your income will likely increase significantly. In many cases, it is more efficient to contribute now and defer claiming the contribution as a deduction until a future year when the tax savings are greater.

6. Habits to Establish Immediately as You Begin Residency

Set a recurring monthly appointment in your calendar to download and save your:

• bank statements 
• credit card statements 
• line of credit statements 

Save them in a secure location. If you change financial institutions, retrieving these later can be costly. And when CRA audits you, these are some of the records they will expect you to have.

Keep all receipts. Develop the habit now.

7. Open a First Home Savings Account Early

Even if you are not planning to purchase a home immediately, open a First Home Savings Account now and contribute a nominal amount; say $20. Doing so starts the clock on your contribution room. Waiting delays that process and reduces future flexibility.

8. A Note on Legal Considerations

I am a healthcare accountant and not a lawyer. However, one of our advisors, Karol Pawlina is. Karol regularly advises physicians on issues that arise early in practice, including:

• common-law relationships and cohabitation agreements 
• purchasing a home 
• employment contracts 
• partnership arrangements 
• wills and powers of attorney 

These are not abstract or theoretical concerns. They arise sooner than expected.

9. A Final Observation

Several medical students we met remarked that this was the first time these topics had been explained in a practical way. That is not surprising. Medical training is focused on clinical excellence. Financial understanding is expected to follow informally. But the transition from training to practice is precisely where these two worlds meet.

Handled properly, it is manageable. Ignored, it becomes unnecessarily difficult and costly.

 

About Tucker Professional Corporation

Tucker Professional Corporation works primarily with medical residents, fellows and physicians across Canada. We assist clients with the tax and financial questions that arise during the transition to practice.

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Disclaimer:

Disclaimer: This article is for general information purposes only and should not be relied upon as professional advice. Readers should consult qualified professionals before making decisions.