Personal Tax Planning Strategies for High-Income Professionals in Ontario | CPA Guide

By Bader A. Chowdry, CPA, CA, LPA | Insight Accounting CPA

At Insight Accounting CPA in Mississauga, we provide expert accounting, tax planning, and advisory services for Ontario businesses across the GTA and Toronto.

By Bader Chowdry, CPA | Insight Accounting CPA Professional Corporation

High-income professionals in Ontario—physicians, lawyers, engineers, consultants, and executives—face some of the highest marginal tax rates in North America. With combined federal and provincial rates reaching 53.53% on income over $220,000, every dollar of unplanned income can cost more than half in taxes.

At Insight Accounting CPA, we specialize in helping high-earning professionals keep more of what they earn through strategic tax planning. This guide covers proven strategies that can save you thousands annually while building long-term wealth.

Understanding Ontario’s Tax Landscape for High Earners

2026 Marginal Tax Rates (Ontario)

Income Bracket	Federal Rate	Ontario Rate	Combined Rate
$0 – $55,867	15.00%	5.05%	20.05%
$55,867 – $111,733	20.50%	9.15%	29.65%
$111,733 – $173,205	26.00%	11.16%	37.16%
$173,205 – $220,000	29.00%	12.16%	41.16%
$220,000 – $246,752	29.00%	13.16%	42.16%
Over $246,752	33.00%	13.16%	46.16%

Note: The Ontario Health Premium (0%–3.56%) and Employer Health Tax add additional considerations for incorporated professionals.

The Impact of High Marginal Rates

At the top bracket, you keep less than 47 cents of every additional dollar earned. This reality makes tax planning not optional—it’s essential for wealth accumulation.

Example: A specialist physician earning $400,000 annually could face $150,000+ in combined income taxes without proper planning. Strategic tax management can often reduce this burden by 15–25% while maintaining full compliance.

Strategy 1: Incorporation for Tax Deferral

When Incorporation Makes Sense

Incorporating your professional practice isn’t right for everyone, but for high earners, the benefits can be substantial:

Tax Deferral Opportunity:

Personal tax rate on $400,000: ~46.16%
Small business tax rate in Ontario: 12.2%

By retaining earnings in your professional corporation (PC), you defer approximately 34 cents on every dollar kept in the business. This deferred tax can be invested, generating compounded growth over decades.

The Investment Advantage

Consider a professional who incorporates and retains $200,000 annually in their PC:

Without incorporation: $200,000 × 46.16% tax = $107,680 after-tax for investment
With incorporation: $200,000 × 12.2% tax = $175,600 available for corporate investment

That extra $67,920 invested annually at 7% return grows to approximately $3.5 million over 20 years—nearly $1.3 million more than the after-personal-tax investment path.

Income Splitting Opportunities

While income splitting rules (TOSI) have tightened, legitimate strategies remain:

Reasonable salary to spouse: For actual work performed, properly documented
Dividend sprinkling: Where family members hold shares and TOSI exemptions apply
Individual pension plans (IPPs): Allowing additional retirement savings with income splitting benefits

Strategy 2: Maximize Registered Accounts

RRSP Strategy for High Earners

The RRSP remains one of the most powerful tax deferral tools available. For 2026:

Contribution limit: 18% of earned income, up to $32,490
Optimal timing: Contribute during peak earning years; withdraw in lower-income retirement

The Delayed Deduction Strategy:

If you expect your income to rise further, consider contributing to your RRSP but delaying the deduction claim. This allows your investments to grow tax-sheltered while you claim the deduction in a higher-tax year.

Example: A senior associate lawyer at $180,000 who expects partnership income of $400,000 next year:

Contribute $32,490 now, get 37.16% deduction = $12,073 tax savings
Or delay deduction, claim at 46.16% next year = $15,000 tax savings
Extra benefit: $2,927 additional tax savings plus a year of tax-sheltered growth

TFSA for Tax-Free Growth

While RRSPs provide tax deferral, TFSAs offer true tax-free growth:

2026 contribution limit: $7,000 (cumulative room may be higher)
Strategic use: Hold your highest-growth investments here

For high earners, max out your TFSA before holding non-registered investments. The tax-free compounding advantage becomes significant over long time horizons.

Spousal RRSP for Income Splitting

If your spouse earns significantly less, spousal RRSPs enable effective income splitting:

You contribute to a spousal RRSP and claim the deduction
After a 2-year attribution period, your spouse withdraws at their lower tax rate
Particularly valuable if one spouse has a generous defined benefit pension while the other does not

Strategy 3: Tax-Efficient Investment Planning

Asset Location Optimization

Where you hold investments matters as much as what you hold:

Account Type	Best For	Avoid Holding
TFSA	High-growth stocks, REITs	GICs, low-return bonds
RRSP	Bonds, US dividend stocks	Canadian dividend stocks (lose preferential treatment)
Corporate	Corporate class funds, growth stocks	Interest-bearing investments (high tax rate)
Personal (non-reg)	Canadian dividend stocks, tax-efficient funds	Bonds, foreign dividends

Canadian Dividend Tax Credit

Eligible Canadian dividends receive preferential tax treatment through the dividend tax credit:

Gross-up: 38% of dividend amount added to income
Tax credit: Approximately 15.02% federal + 10% Ontario on grossed-up amount
Effective tax rate: Top marginal rate on eligible dividends is approximately 36% vs. 46% on salary

For non-registered investments, Canadian blue-chip dividend stocks often outperform bonds on an after-tax basis for high earners.

Strategy 4: Strategic Deductions for Professionals

Commonly Overlooked Deductions

Professional Dues and Memberships:

Law Society, CPA Ontario, Medical Council fees
Professional association memberships
Mandatory continuing education requirements

Home Office Expenses (for incorporated professionals):

Rent or property costs for dedicated office space
Utilities, internet, maintenance (pro-rated)
Office furniture and equipment under immediate expensing limits

Vehicle and Travel:

Business-related mileage (detailed log required)
Professional development conferences
Client entertainment (50% deductible)

Insurance and Benefits:

Professional liability insurance
Health and dental premiums (structured properly through corporation)
Life insurance (in specific corporate structures)

Medical Expense Tax Credit Strategy

The medical expense tax credit has a threshold (3% of net income or fixed amount, whichever is less). For high earners, this often means minimal benefit unless expenses are substantial.

Alternative: If you have a health spending account through your corporation, medical expenses can be deducted at the corporate level—often more tax-efficient for high earners.

Strategy 5: Charitable Giving Optimization

Strategic Timing of Donations

Charitable donations provide tax credits at:

15% federal (first $200)
29% federal (amounts over $200)
Plus Ontario credits: 5.05% (first $200), 11.16% (over $200)

Bunching Strategy: Instead of giving $5,000 annually, give $10,000 every two years. The excess over $200 receives the higher credit rate, improving tax efficiency.

Donating Appreciated Securities

Donating publicly traded securities with unrealized gains eliminates the capital gains tax entirely:

Scenario: You have $50,000 in appreciated stocks with $20,000 in unrealized gains
Option A: Sell stocks, pay capital gains tax (~$5,000), donate cash $45,000
Option B: Donate securities directly, no capital gains tax, full $50,000 donation credit
Net benefit: ~$5,000 in tax savings plus larger donation

Strategy 6: Estate and Succession Planning

The $250,000 Capital Gains Exemption

The 2024 federal budget introduced a $250,000 lifetime exemption on capital gains for individuals. For high earners:

Real estate investments (not principal residence)
Non-registered investment portfolios
Inherited assets with stepped-up basis

Proper planning can maximize use of this exemption across family members and over time.

Estate Freeze for Business Owners

If your professional corporation has accumulated significant value:

Implement an estate freeze to cap your tax liability
Issue new growth shares to family members or a family trust
Future appreciation occurs outside your estate, reducing terminal tax
Must be structured carefully to avoid attribution and TOSI issues

Strategy 7: Retirement Compensation Arrangements

Individual Pension Plans (IPPs)

For incorporated professionals over 40, IPPs offer advantages over RRSPs:

Higher contribution limits than RRSPs (especially as you age)
Ability to make up for past service
Corporate deductibility of contributions and fees
Creditor protection

Considerations: Higher administrative costs and reduced flexibility make IPPs suitable for established practices with predictable cash flow.

Retirement Compensation Arrangements (RCAs)

For very high earners who have maxed out RRSP and IPP room:

Employer (your PC) contributes to a trust
50% refundable tax withheld by CRA (recoverable when benefits paid)
No contribution limits
Particularly useful for those planning to retire in lower-tax jurisdictions

Common Mistakes High Earners Make

1. Ignoring Alternative Minimum Tax (AMT)

High deductions and credits can trigger AMT, limiting the benefit of certain strategies. Model your tax situation before implementing aggressive deduction strategies.

2. Overlooking the Ontario Health Premium

This income-tested premium ranges from $0 to $900 annually but is often forgotten in tax planning calculations.

3. Mismatched Corporate and Personal Strategies

Your personal and corporate tax situations must be coordinated. Decisions made in isolation—like aggressive personal deductions while retaining corporate earnings—can create inefficiencies.

4. Failing to Plan for Retirement Withdrawals

Tax deferral is valuable, but eventually funds must come out. Plan your withdrawal strategy 5–10 years before retirement to minimize lifetime tax burden.

Implementation Timeline

January–February

Maximize RRSP contributions for prior year (deadline: March 3, 2026)
Review TFSA room and contribution strategy
Evaluate professional corporation remuneration mix

March–April

File personal and corporate tax returns
Plan current-year tax strategy based on projected income
Review quarterly installment requirements

May–December

Execute planned strategies (charitable giving, investment rebalancing)
Monitor income throughout year for mid-course corrections
Review corporate retained earnings and dividend strategy

Working with Your Tax Advisor

Effective tax planning requires ongoing collaboration. At Insight Accounting CPA, we recommend:

Quarterly check-ins: Review income and adjust strategies as circumstances change
Annual planning sessions: Comprehensive review before year-end
Life event planning: Marriage, children, property purchases, business transitions

The savings from proactive planning typically far exceed the cost of professional advice.

Frequently Asked Questions

What’s the most important tax strategy for high earners?

Incorporation for tax deferral often provides the greatest long-term benefit, but it must be structured properly and suit your specific circumstances. The ability to invest pre-personal-tax dollars creates a compounding advantage that grows substantially over time.

Should I prioritize RRSP or TFSA contributions?

For high earners in top tax brackets, RRSPs generally provide greater immediate tax savings. However, TFSAs offer more flexibility and tax-free growth. Ideally, maximize both. If forced to choose, RRSP first at peak earning years, then TFSA.

How do I know if incorporation is right for me?

Consider incorporation if you: (1) earn significantly more than you need for personal expenses, (2) plan to invest retained earnings, (3) have or expect significant income fluctuation, and (4) can manage the additional compliance requirements. A detailed cost-benefit analysis is essential.

Can I deduct professional development expenses?

Yes, if required to maintain professional status or directly related to your current practice. This includes continuing education, conferences, and professional examination fees. Personal interest courses generally don’t qualify.

What’s the best way to handle charitable giving?

Donate appreciated securities when possible. Consider bunching donations to exceed the $200 threshold for higher credit rates. For significant giving, establish a private foundation or donor-advised fund for administrative efficiency and family involvement.

How does the new capital gains exemption work?

The $250,000 lifetime exemption applies to net capital gains realized after June 25, 2024. For gains exceeding this threshold, the inclusion rate increased to two-thirds. Principal residences remain fully exempt. Proper tracking of adjusted cost base is essential.

Effective tax planning is about making informed decisions, not avoiding taxes. At Insight Accounting CPA, we help high-income professionals in Mississauga, Toronto, and across Ontario optimize their tax position while maintaining full compliance with CRA requirements.

Ready to reduce your tax burden?

📞 Call (905) 270-1873 to schedule a personal tax planning consultation.

🌐 Visit insightscpa.ca to learn more about our tax optimization services for professionals.

Disclaimer: This article is for informational purposes only and does not constitute tax advice. Tax strategies should be tailored to individual circumstances. CPA Ontario standards prohibit guaranteed outcomes. Past tax savings do not guarantee future results. Consult with a qualified CPA before implementing any tax strategy.