Lawyers and Accountants: Professional Corp Tax Tips + Legal & CPA Firm Tax Planning Canada: How to Reduce Taxes, Maximize Billable Income, and Protect Your Practice — A Montreal CPA Firm Near You Explains

Introduction
Understanding professional corporation tax planning for lawyers and accountants is essential for practitioners in private practice, boutique firms, partnerships, solo practices, and incorporated professionals. Because legal and accounting professionals earn fully taxable fee-based income, lack employer benefits, and often face high overhead, strategic tax planning is critical. Incorporating your practice, optimizing deductions, planning remuneration, and structuring investments inside the corporation can significantly reduce taxes and increase long-term wealth. This guide explains how lawyers and accountants can lower their tax burden, protect assets, and build tax-efficient practices in Canada and Québec.

Why Lawyers and Accountants Should Incorporate
A professional corporation allows lawyers and accountants to:
pay a much lower corporate tax rate
defer taxes by leaving income inside the corporation
control the timing of personal income
structure salary and dividends for optimal tax results
write off more business expenses
build corporate investment portfolios
protect practice-related assets
Incorporation is one of the most effective wealth-building strategies for high-income professionals because it allows significant tax deferral over time.

Salary vs Dividend Planning for Professional Corporations
Once incorporated, professionals must choose between salary, dividends, or a mixed strategy.
Salary creates RRSP room, counts toward CPP/QPP, and provides more predictable income.
Dividends reduce payroll costs and can provide more tax-efficient cash flow.
A mixed strategy often provides the best result by balancing retirement planning, corporate tax savings, and personal tax efficiency.

Income Splitting and TOSI for Professionals
Tax on Split Income (TOSI) rules restrict dividend payments to family members unless exemptions apply. Exemptions include:
spouses over age 65 receiving dividends
spouses or adult children who work 20+ hours per week in the business
shareholders who contributed capital or assumed risk
reasonable returns on labour or capital
Professionals must document involvement of family members properly to avoid top-rate TOSI taxation.

Top Deductions for Lawyers and Accountants
Professional corporations can deduct a wide range of business expenses, including:
office rent and shared workspace fees
legal and accounting software
practice management tools
continuing education and licensing fees
malpractice insurance or professional liability insurance
client entertainment (subject to 50 percent rule)
membership dues and bar association fees
assistant and paralegal salaries
digital advertising and website costs
office equipment, laptops, and mobile devices
These deductions reduce taxable corporate income significantly.

Home Office Deduction for Hybrid Professionals
Lawyers and accountants who work partly from home may claim a home office deduction for:
internet
utilities
portion of rent or mortgage interest (if incorporated)
property taxes
office supplies
CRA requires that the workspace be used regularly and exclusively for business purposes. Documentation improves audit defense.

Large Capital Purchases and CCA for Professional Firms
Professional firms routinely purchase equipment and technology. Capital cost allowance (CCA) may be claimed on:
laptops and workstations
servers and office networks
audio/video equipment for remote consultations
office furniture
leasehold improvements
These deductions reduce corporate tax by claiming depreciation on assets over time.

Vehicle Deductions for Mobile Professionals
Professionals who travel for court, site visits, client meetings, or due diligence purposes may deduct:
mileage
fuel
repairs
insurance
leasing costs
Only business-related travel qualifies. CRA frequently audits professionals for missing mileage logs, so accurate tracking is essential.

GST/HST and QST Rules for Professional Services
Lawyers and accountants must charge GST/HST and QST on most services unless specifically exempt (rare for these professions). Firms must:
configure tax settings correctly in billing software
remit GST/HST and QST accurately
claim input tax credits on expenses
Incorrect GST/QST is one of the biggest audit triggers in professional firms.

Partnerships, Sole Practices, and PCVs
Many lawyers and accountants operate through:
professional corporations
partnerships of professional corporations (PPCs)
sole proprietorships transitioning to incorporation
Each structure comes with unique tax rules. Partnerships may allocate income to partners but require proper agreements and capital tracking.

Holding Companies for Professional Firms
Some lawyers and accountants use holding companies (Holdcos) to:
protect retained earnings
invest corporate surplus
hold real estate (including offices or buildings)
plan for succession
tax-efficiently distribute capital dividends
Holding companies help professionals grow wealth outside their operating corporation while reducing risk.

Retirement Planning for Lawyers and Accountants
Because professionals lack employer pensions, retirement planning is crucial. Professionals can use:
RRSPs
TFSAs
corporate investment portfolios
individual pension plans (IPPs)
life insurance–based retirement strategies
IPPs are especially beneficial for older high-income professionals seeking predictable retirement contributions.

Professional Liability and Corporate Protection
Professional corporations do not shield practitioners from malpractice, but they do provide protection for business-related liabilities, leases, equipment financing, and employee matters. Proper structuring reduces exposure to risk.

Common CRA Audit Triggers for Lawyers and Accountants
large auto expenses
missing home office documentation
incorrect GST/QST setup
excessive meals and entertainment
unjustified dividends to family members
sudden swings in revenue
CRA closely monitors professional corporations due to high income levels and potential for aggressive tax planning.

Recordkeeping Requirements for Professional Firms
Professionals must maintain:
invoices and receipts
client billing records
general ledgers
T4 and RL-1 payroll slips
GST/QST reports
bank reconciliations
corporate minute books
retainer agreements
Strong documentation strengthens audit defense and supports deductions.

Tax Planning for Lawyers and Accountants
Professionals benefit from:
incorporation
optimized salary/dividend structures
IPPs for retirement
holding-company strategies
TOSI-safe income splitting
CCA on major purchases
home office planning
GST/QST advisory
Proper planning reduces tax by tens of thousands annually for high-income practitioners.

Mackisen Strategy
Mackisen CPA provides complete tax structuring for lawyers and accountants, including incorporation, corporate reorganization, salary/dividend optimization, GST/QST setup, bookkeeping, audit defense, capital-dividend planning, and retirement tax strategies. We help professionals operate efficiently while protecting their income and staying fully compliant.

Real Client Experience
A Montréal lawyer saved over 40 percent in taxes after switching to a professional corporation. An accounting firm partner implemented a Holdco structure to protect surplus. A tax lawyer facing TOSI issues resolved family dividend distribution with Mackisen’s strategy. A CPA practitioner improved cash flow using a mixed remuneration plan and IPP integration.

Common Questions
Should lawyers and accountants incorporate? Yes if earning moderate to high income.
Can they split income? Only under TOSI exemptions.
Are software costs deductible? Yes.
Can vehicle expenses be deducted? Yes with business-use logs.
Is GST/QST mandatory? Almost always, unless exempt services apply.
Do professionals get audited frequently? Yes, due to high income and complex claims.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps lawyers and accountants reduce taxes, protect their practice, and build long-term financial security through precise corporate planning and expert tax strategies. Our solutions are trusted by legal and accounting professionals across Québec.