Mark Carney confirmed that his government will not proceed with an increase to Canada’s capital gains tax. This has significant implications for dentists—both as business owners and as investors.
Dentists often have dual exposure to capital gains—through their practice sales and their personal investment portfolios. A proposed increase would have added another layer of complexity to tax planning, making it more expensive to sell assets or transition a practice. Not increasing capital gains tax will provide a strategic window of opportunity for dentists to optimize their financial plans without facing a steeper tax burden.
Why capital gains taxes matter for dentists
Capital gains tax impacts dentists in two major ways:
1.) Practice sales & business transitions – Many dentists rely on the sale of their practice as a key wealth-building strategy. If capital gains tax had increased, selling a practice would have resulted in higher tax liabilities, reducing net proceeds from the sale. This would have been particularly concerning for those nearing retirement or considering a transition. With no imminent tax hike, practice owners may have more flexibility in timing their exit strategy without facing additional tax headwinds.
2.) Investment portfolios & long-term wealth – Dentists, like many high-income professionals, invest in stocks, real estate, and corporate accounts that generate capital gains. A tax increase would have meant lower after-tax investment returns, making wealth accumulation less efficient. With capital gains rates expected to remain unchanged, dentists can continue executing long-term investment strategies without adjusting for an additional tax drag.
What this means for tax planning & wealth management
If capital gains tax remains at its current level, dentists should take advantage of the stability and implement proactive tax strategies:
- Leverage the Lifetime Capital Gains Exemption (LCGE) – The LCGE remains one of the most powerful tax planning tools for dentists selling their practice. If rates remain unchanged, practice owners can continue maximizing tax-free gains when they transition ownership. Structuring a sale effectively—whether through a family trust or staggered sale—can further reduce tax exposure.
- Optimize corporate investments – Dentists operating through professional corporations often invest surplus income within their corporate accounts. If capital gains tax stays the same, maintaining tax-efficient corporate investment strategies remains viable. This includes capital gain-focused investments (e.g., equities, real estate, private lending) instead of high-taxed interest income investments.
- Strategic portfolio rebalancing – Without an increased tax penalty, dentists should still be deliberate in harvesting capital gains at opportune times. For those with large unrealized gains, gradually realizing gains in lower-income years or shifting investments across family members can still minimize tax liabilities.
- Real estate & passive investments – Many dentists own real estate, either personally or through professional corporations. An increase in capital gains tax would have reduced the after-tax return on property sales, especially for those considering liquidation. With rates holding steady, real estate remains a strong diversification tool for wealth building.
Maximizing the opportunity: Practical next steps
Dentists should treat this decision as an opportunity to optimize their financial strategies before any future tax changes:
- For practice owners: If you’re considering a sale, this might be an opportune time to structure your exit strategy while capital gains rates remain favorable. Work with a financial planner & accountant to ensure your LCGE is fully utilized and to evaluate trust structures that could reduce tax exposure.
- For investors: Given the potential stability in tax rates, dentists should continue focusing on long-term growth strategies in equities, real estate, and corporate investments—while ensuring gains are realized tax-efficiently.
- For those with a corporation: Corporate investments can still be a powerful wealth-building tool, especially if structured properly. Work with a tax advisor to determine whether shifting income from dividends to capital gains remains an effective strategy for your corporate investment portfolio.
Final thoughts
Since capital gains tax remains unchanged following Carney’s final decision, it offers a period of stability that dentists should take advantage of. Whether it’s structuring a practice sale, refining an investment strategy, or optimizing corporate tax planning, dentists should use this window to lock in long-term efficiencies before any future tax changes occur. While this provides a sense of relief, it’s important not to make drastic financial decisions solely because the capital gains tax has not increased. The last thing you want to do is sell your clinic or other valuable assets out of fear of future tax changes. However, if a sale, rebalancing, or investment shift was already part of your financial strategy, this decision offers more stability and peace of mind compared to a few months ago when concerns about a higher capital gains inclusion rate were more pressing.
About the author:
Gurtej Varn is a wealth advisor specializing in serving early to mid-career dentists. His firm, White Coat Financial Inc., offers a full suite of services – investments, insurance, mortgages, tax planning, and financial advice. He’s quickly becoming the go-to advisor for dentists across Canada.
