Most dentists think about tax planning as something that happens every April. For a dentist who owns a practice, the biggest tax decision of a career usually happens only once, the day the practice gets sold, and by then it is often too late to fix the structure that determines how much of that sale you actually keep.
Selling the Practice Is Where the Real Money Is
If your practice is incorporated and structured correctly, selling the shares rather than the assets can shelter a large piece of the gain through the Lifetime Capital Gains Exemption. For 2026, the exemption shelters up to $1,275,000 of eligible capital gains on qualifying small business corporation shares, which works out to a $637,500 deduction against the taxable half of that gain. On a practice sale in the high six or seven figures, that is the difference between a modest tax bill and a very large one.
The exemption only applies to a share sale of a qualifying corporation. A straightforward asset sale doesn’t qualify, and the corporation has to pass tests on how its assets have been used in the 24 months before the sale. Practices that have built up cash, investments, or property inside the corporation can fail these tests without warning, which is exactly why this needs to be planned years in advance rather than sorted out in the weeks before a sale.
Splitting Income With Family Runs Into the Same Wall as Medicine
A dental professional corporation faces the identical restriction as a medical one when it comes to paying dividends to a spouse or adult child. The tax on split income rules carry an exception for family members who hold at least 10 percent of a corporation’s shares, but that exception is written to exclude professional corporations by name, dental ones included. Ontario’s own corporate law adds another layer on top of the tax rule: non-voting shares in a dentistry corporation can only be held by the dentist’s spouse, child, or parent, so even where the tax exception doesn’t apply, the pool of people who could hold shares at all is narrow to begin with.
Salary paid for real work in the practice is unaffected by any of this, and dividends can still qualify if the family member is genuinely and regularly engaged in running the practice, not simply a shareholder on paper.
Retirement Savings Can Outgrow an RRSP
Once a dentist is taking a T4 salary from their own corporation and is past 40, an Individual Pension Plan becomes worth comparing against an RRSP. An IPP is a defined benefit pension plan the corporation sponsors for a single member, and past roughly age 40, it can allow meaningfully larger tax-deductible contributions each year than the RRSP limit permits, funded and deducted by the corporation rather than personally. It can also fund a lump sum for past years of service going back to 1991, which an RRSP cannot do. The tradeoff is that an IPP needs salary income to work at all, so it only makes sense alongside a compensation mix that already includes a real T4 salary rather than one built entirely around dividends.
Cosmetic Work Is Where GST/HST Registration Catches Up With You
Basic dental services are GST/HST exempt, the same way most physician and nursing services are, which is why most general dentistry billing never touches the tax at all. Cosmetic dentistry, teeth whitening billed outside a covered treatment plan, and other elective procedures are taxable supplies like any other business income. A practice whose taxable, non-exempt work crosses $30,000 in a single calendar quarter or over four consecutive quarters has to register and charge GST/HST on that portion, even while the exempt core of the practice stays untouched. Practices that have added cosmetic services alongside general dentistry are the ones most likely to cross that threshold without noticing, since the exempt majority of the billing can hide a growing taxable slice underneath it.
The Structure Decides More Than the Income Does
Two dentists earning the same amount can end up with very different outcomes depending on how their corporation is built, who is actually involved in running the practice, and how far out they are from selling it. Your Modern Accountant works with dentists and other dental professionals across Canada through our tax planning service to get that structure right well before a sale, a retirement, or a CRA review forces the question.