Claiming travel expenses for medical professionals

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It’s your friendly tax aficionado, George Dube, here to shed some light on a popular topic: travel expenses for medical professionals. Now, I know what you’re thinking – taxes and deductions might not be the most thrilling subjects, but trust me, this is one you’ll want to pay close attention to. Why? Because understanding the ins and outs of travel expense deductions can put more money back in your pocket, where it belongs. So, in this video, I unravel the complexities of tax deductions for travel expenses, tailored specifically for healthcare professionals.

Video Transcript: Claiming travel expenses for medical professionals

Can I deduct my travel expenses?

As a medical professional, and you may have heard me say this before, but the answer is, it depends.

I’m George Dube, saving the world from tax, one bow tie at a time.

Please stick around to the end of the video. We’re going to talk about a pretty significant tip slash trap relating to foreign travel.

So what does your answer depend on?

In Revenue Canada’s eyes, they’re looking to see whether or not we’ve incurred these travel expenses as part of the process of earning the income from a business or property. Let’s look at a couple of examples from a medical professional standpoint. And here again as a real general framework to be thinking of, Revenue Canada is looking to make sure that we’re deducting reasonable amounts and so they are going to have administrative positions which help define in their eyes what this means or how it should be interpreted. It doesn’t mean that that’s what’s written in the Income Tax Act. It means this is Revenue Canada’s opinion.

So, possibilities for deductions include:

public transportation costs,
hotel,
meals.

We also need to be thinking are there specific restrictions that are placed on to us beyond the “Is it reasonable?”

One of the best examples of the restriction relates to what we call meals and entertainment. And that’s to say, only 50% of the cost would be deductible. Revenue Canada is trying to get across the concept with the Meals and Entertainment 50% restriction, that the people of Canada are not here to subsidize what would otherwise be a personal expense. In other words, you had to eat anyway. But it is Revenue Canada’s way of acknowledging that there may be some extra costs associated with travel.

Employee vs company owner

So the question arises, if I’m an employee of a medical practice as compared to I have perhaps my own professional company or other company that I’m conducting my. operation out of, is there a difference in terms of the travel expenses? Again, we’re going to have a series of videos specifically related to automobile expenses. And part of that you’re going to see, there are definitely more restrictions for individuals in terms of how the calculation is completed, in contrast to owning a corporation, which in turn is providing medical services.

Is travel to and from a hospital or clinic deductible?

A common question we get from medical professionals is “is the cost of going back and forth in terms of travel to the hospital or to a clinic, wherever it may be, is that deductible?”

Again, here the answer, as I’m sure you’re growing appreciative of, is, it depends. Where’s your primary place of business? Do you regularly, habitually go to other places? If so Revenue Canada would consider as a personal expense going back and forth to work, whatever that means. Whereas if we are regularly reporting to a particular office or clinic or hospital, and occasionally we have to go to other places to meet with patients, that’s a little different as compared to regularly and habitually having to quote, unquote, “show up for work”.

Are conventions deductible as travel expenses for medical professionals?

As a medical professional, it’s quite reasonable to expect that you’re periodically going to be attending conventions. Are the costs deductible? Again, it depends.

Revenue Canada has this concept, their interpretation of the rule. Nowhere is this written in the Income Tax Act. But if you attend up to two conventions a year, whether in or outside of the country, that may be seen as deductible. Their definition, I expect, of what reasonable means.

Trying to define the difference between a convention, conference, course, networking opportunities, business development opportunities, we start to muddy the waters. And here the more information we can provide to Revenue Canada to show what we’re learning, what the purpose of the trip was. Was it for the purpose of earning income from a business or property? The more benefits we’ll receive in terms of the question marks that may otherwise be obtained upon an audit. We want to give Revenue Canada as few reasons to doubt as possible.

Revenue Canada has stated, in their eyes, that if the governing body, for example, that is sponsoring the convention is in that general location, that would be satisfactory. Whereas if a local doctors’ association in your particular city was sponsoring an event in Paris, Revenue Canada is not going to be impressed. So here again, trying to make sure we’re being reasonable in scenarios. On the other hand, if there was a Paris group sponsoring this, it’s a completely different story.

It may sound silly. But trying to pre- arrange what’s going to be deemed to be acceptable for Revenue Canada ,or more likely to be deemed acceptable, is worth some effort. And it’s not to say that we again, if we’re using now Paris as the example, can’t have some personal component to that. Some vacation time. It’s then to say what was the primary purpose of going there and if the primary purpose was to attend a convention, our cost of airfare, for example, should be deductible. Meals and entertainment for when we’re there relating to the convention should be deductible.

Revenue Canada also wants to ensure that if you’re given a flat amount in terms of the fee for the convention, we have to carve out a little bit for meals, again to recognize only 50% of that’s deductible. But the amount tends to be relatively minor. It can be $50. Those numbers I think will change over time. But the concept is still there. Being able to differentiate a business component versus the personal element. If we’re reasonable with Revenue Canada, predominantly they’ll be reasonable with us.

Inviting family – what can medical professionals claim for travel expenses?

Often a leading question or follow up question to the travel expenses and foreign travel or out of province travel in particular. What happens if I’m inviting family? Spouse. Kids. How does this play into it?

So, let’s again look at an example.

But first I think we can in most cases safely say having minor children attend with us is not going to help from that business perspective.

Having a spouse attend, however, completely different story. Possibly. So again, here it’s also going to start to depend on, well, for example, the age of the children. If one of the parents is attending conferences, business events, etcetera. And we have a couple of toddlers running around, that’s probably a full-time job for the other parent. Again, harder to argue they were involved in the business aspects. Whereas if those children were teenagers, as an example, to a degree they can take care of themselves.

Often, that conference may have breakout sessions and whatnot for the spouse. So, again, going down to the conference, having your husband attend the breakout sessions for the other spouses, that’s all wonderful. And if again, maybe, it’s going to be, say, a day of the conference of a three-day conference, maybe we’ve justified the husband being able to be deducted for the one day. You’re being deducted for, say, the three days. The kids not at all.

What we’re trying to do is carve out the business versus the personal element. So it’s not to say that you can’t have spouses or children attending. It’s to say let’s be reasonable. Was it really necessary? Did it help? In some areas maybe both of the spouses are actually attending legitimately quite the conference from that business perspective. Let’s ensure we’ve got a reasonable story for Revenue Canada to see why it was necessary to have family there.

Tax trap – creating nexus out of the country

A little trap exists as we potentially consider doing some travel out of the country. If we’re making business decisions, signing contracts, deciding on some significant events for our corporation for business and investment activities, we do run the risk of all of a sudden creating Nexus in a foreign country. Where is mind and management of that business?

So the significance of Nexus? In short, this may mean you’re filing tax returns, other information returns, who knows what, in this foreign jurisdiction on top of what you have to do for Canada. And perhaps you’re going to need to reconcile those. So that quick vacation slash business trip may be a lot more than you bargained for.

So it’s not to say that we can’t do foreign travel. It’s to say let’s be careful of the nature of that and where we’re actually doing business.

Invite your…

As a medical professional, I think you’ve seen now that deducting travel expenses, perhaps not as simple as it otherwise would seem. So one last helpful tip, and I frequently suggest this. I can’t quite guarantee 100% success. I’m sure it’s pretty good, and that’s to say if you’re going on a trip, that’s a nice resort area, destination, pleasant to be around, et cetera, some personal, some business and we want to tilt this more, help ensure it’s more business focused, invite your accountant! I think this will help significantly.

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Resources

Claiming travel expenses for medical professionals is just one way to save taxes. For additional resources related to saving taxes, and building wealth, for medical professionals, see: