Practical guidance on contracts, GST/HST, CPP and incorporating for NPs, from our October 22 webinar with accountant Bilal Rammo, CPA, CGA, MBA.
Almost 700 people registered for our Financial Essentials webinar in October, and we still had questions waiting when we ran out of time.
That didn't surprise me. Most of us never learn about taxes or contracts in our NP programs, yet more of us take on contract work, virtual care shifts and independent practice every year. A single contract can change how you're taxed, what you can write off and what you owe in April.
I asked Bilal Rammo to lead this session because he has been my accountant, personally and for NP Circle, and he explains tax in plain language. NP Circle receives no financial compensation for any referrals.
Below are the key lessons from the session. The examples use Ontario rates, and we've noted where the rules differ across Canada. This is general information, so please check your own situation with an accountant before you make a change.
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The 3 ways NPs get paid
Before getting into contracts and tax, it helps to know the 3 setups. Many NPs use more than one, such as a hospital job with contract virtual care on the side.
| Setup | How it works | Tax and CPP | Good to know |
|---|---|---|---|
| Employee | An employer pays you a salary or hourly wage, and you get a T4 slip at tax time. | Tax and CPP come off every pay, and your employer pays half of your CPP. | You can deduct very few work costs. Benefits and paid time off usually come with the job. |
| Sole proprietor (self-employed) | You work as a contractor in your own name and send invoices. It starts automatically, with no company to set up. | Nothing comes off your pay. You report business income on your own tax return (form T2125) and pay both halves of CPP. | You can deduct your business costs. You only need a business number from the CRA if you have to charge GST/HST. |
| Corporation (incorporated) | You set up a company that you own. Clients pay the company, and the company pays you. | The company files its own tax return (T2) and pays a lower rate on money you leave in it. You pay personal tax when you take money out. | It costs more to set up and run, with more paperwork. It's only worth it if you can leave money in the company. |
Not sure which fits you? The 3-question decision guide further down walks you through it.
Are you an employee or a contractor?
Being a contractor isn't decided by what your contract says. The Canada Revenue Agency (CRA) looks at how the work actually happens:
- Control: who decides your hours and how you do the work?
- Tools: who provides the space, EMR and supplies?
- Profit and risk: can you earn more, or lose money, depending on how you run things?
- Business: do you have other clients and send invoices?
- Intent: does the day-to-day reality match what both sides intended?
If one clinic sets your schedule, provides everything and is your only source of work, the CRA will likely see you as an employee, even if your contract calls you a contractor. If you choose your own days, can turn work down and have other clients, you look much more like a contractor. You can also be both: an employee in one role and a contractor in another, even at the same clinic.
Work out what a contract really needs to pay
A higher hourly rate can look like a raise when it isn't.
Bilal shared a scenario many NPs will recognize. An NP earning about $61.50 an hour as an employee accepts an $80 an hour contract and plans to quit their job to do it full-time. Then summer comes, and their vacation is unpaid. When they get sick, there's no pay. There are no benefits to fall back on in an emergency. And at tax time in April, they find out they now owe both halves of CPP.
In other words, a contract has to replace everything your employer used to cover: their share of CPP, your benefits and pension match, and every paid day off, plus the business costs you now carry yourself. Here is how that adds up for an NP earning $120,000 a year:
| What the contract has to cover | Per year |
|---|---|
| Salary you're replacing | $120,000 |
| Employer's share of CPP and CPP2 (2026) | $4,646 |
| Benefits and pension match (estimate) | $12,000 |
| Business costs that are now yours as an independent contractor (estimate) | $6,000 |
| Total the contract has to replace | $142,646 |
As an employee, that salary works out to $61.54 an hour over 1,950 paid hours. As a contractor, you'd bill closer to 1,695 hours once you take 4 weeks of vacation, 9 statutory holidays and 5 sick days, none of them paid. So the contract needs to pay $84.16 an hour just to break even, about 37% more, before any profit for the extra risk you're taking on.
So the NP's raise was actually a pay cut. Bilal's advice: if $84 is your break-even, don't accept $84. Ask for more, so you can buy your own insurance and build an emergency fund.
Try it with your own numbers
Break-even contract rate
$84.16 / hour
Uses 2026 CPP rates (5.95% employer share on earnings from $3,500 to $74,600, plus CPP2 of 4% up to $85,000). Quebec uses QPP, so the amount there is slightly different. Billable hours assume a 5-day week.
Fee splits: know what you're paying for
Your hourly rate is only part of the picture. If you contract in someone else's clinic, you'll usually pay a percentage of what you bill, pay a flat monthly fee, or work a sessional rate where the clinic keeps the billing.
On a 30% split, if you bill $200,000, the clinic keeps $60,000. Whether that's fair depends on what it covers: space, reception and booking, EMR, supplies, billing, cleaning and IT. Price out what those would cost you on your own before you agree.
Think of it like housing. A flat fee is like rent: the same every month. A percentage split is like a roommate who takes a share of every paycheque, which works well when you're starting out but gets more expensive as you get busier. And just as you'd ask whether rent includes Wi-Fi, ask what the fee includes: reception, the EMR, billing and collections.
One option is to ask for a split that steps down as your billings grow, for example 30% on the first $50,000 and less after that. Also ask whether the split is calculated before or after GST/HST, since you usually can't recover the tax you pay on it.
What you can write off
Contracting also changes what you can deduct. The basic rule is that an expense is deductible when you spend it to earn your business income. As an employee, you can claim very little. As a contractor, you can usually deduct:
- professional liability insurance, licensing and professional fees
- accounting and legal fees
- EMR and software
- office or clinic costs
- the business portion of supplies, your car and your home office
- conferences and education related to your business
- business meals, generally at 50%
Employees can only claim car and home office costs if their employer signs a T2200 form. Fines, including speeding tickets, are never deductible. Driving to the same clinic every day counts as commuting (unless your home office is your main place of business), but driving between clinics or to patients' homes is business use. Keep a mileage log, along with your receipts and invoices, for 6 years.
And yes, someone asked whether you can write off your cat. Only if you run a cat café!
GST/HST depends on the service, not your title
GST/HST is the sales tax added to some goods and services. If it sounds complicated, consider Bilal's donut example. Buy one donut and you'll generally pay tax, but buy six or more and they're treated as basic groceries with no tax. If donuts can be this complicated, it's no surprise healthcare can be too!
Patient care and medically necessary services are exempt. Consulting, speaking, training, medico-legal reports, completing forms and cosmetic services that aren't medically necessary may be taxable.
Ontario and the Atlantic provinces charge HST, while the other provinces and territories charge GST, and some also charge PST or QST. The registration rule is the same across Canada: once your taxable services pass $30,000 over four consecutive calendar quarters, you have to register and start charging tax. You can register earlier by choice, but then you charge it on every taxable service. If you do a mix of patient care and taxable work, ask your accountant how to set it up.
Put money aside from every payment
Nothing is taken off contract pay, so the whole bill arrives at tax time unless you plan for it.
- CPP: self-employed NPs pay both halves, 11.9% of earnings from $3,500 to $74,600, plus CPP2 (a second, smaller contribution on higher earnings) of 8% on earnings between $74,600 and $85,000. That's up to about $9,300 in 2026. CPP you already paid through an employee job counts toward it.
- Deadlines: pay any balance by April 30. Self-employed NPs can file until June 15, but interest still starts after April 30.
- Instalments: if you owe more than $3,000 this year and in either of the past 2 years, the CRA expects payments on March 15, June 15, September 15 and December 15.
- Records: keep receipts, invoices and mileage logs for 6 years.
A separate business bank account helps too. It's required for a corporation and a good idea for everyone else, because an audit of a mixed account can pull in your personal spending.
Should you incorporate?
As your contract income grows, the next question is usually whether to incorporate. The main tax benefit of a corporation is that you can delay paying personal tax on income you leave in the company. In Ontario, business income kept in a corporation is taxed at a combined federal and provincial rate of 11.2% on the first $500,000 (since July 1, 2026), while personal rates go up to 53.53%. The corporation lets you pay personal tax later, when you take the money out. Small business rates vary by province, so check yours.
Think of a corporation as a piggy bank with a lower tax rate. Money you put in is taxed lightly, but you pay personal tax when you break it open. If you take it all out right away, you end up paying about the same tax as if it had never gone in.
That only helps if you can leave money in the corporation. The question to ask yourself is how much you actually need to live on. If you need $80,000 a year and earn $160,000, incorporating may make sense. If you need almost everything you earn, the money all comes out to you anyway, and you're paying extra costs for nothing.
Those costs add up. Yearly accounting for a simple corporation starts at around $2,500 and can reach $6,000 to $8,000 with bookkeeping, plus about $1,000 to $2,500 to set it up.
A corporation also comes with its own deadlines. The corporate tax return (T2) is due 6 months after your year-end, any tax owing is usually due at 3 months, and paying yourself a salary means payroll remittances and T4 or T5 slips by the end of February. Paying family members through a corporation to lower your tax is heavily restricted by the tax on split income rules (TOSI), so ask your accountant before you plan around it.
Two things to know before you incorporate:
- A corporation doesn't protect you from malpractice claims. You still need your own professional liability coverage.
- If you'd really be an employee without the corporation, the CRA can treat it as a personal services business. In Ontario that means 44.5% corporate tax instead of 11.2%, so get advice first if you work for one main payer.
In Ontario, nurses incorporate as a Health Profession Corporation. You need a Certificate of Authorization from the College of Nurses of Ontario (CNO), renewed every year. Only CNO members can be shareholders, and the name has to include "Nursing" and "Professional Corporation". Other provinces have their own rules, so check with your nursing regulator before you incorporate.
Salary or dividends?
Once you're incorporated, you can pay yourself a salary, dividends (a share of the company's profits paid to you as the owner) or a mix. The overall tax works out roughly the same either way, so the choice comes down to other factors your accountant can advise you on. Ontario is also reducing its dividend tax credit in 2027, which makes dividends slightly less attractive there.
A salary builds CPP and RRSP room, counts as earned income for the childcare deduction, and mortgage lenders usually like to see one, but it means running payroll. Dividends are simpler to pay out, but they don't build CPP or RRSP room. Review your mix with your accountant every year.
Whenever you move money from your corporation to your personal account, remember that some of it is owed in tax. If your rate is about 25%, keep $2,500 of every $10,000 aside.
Employee, sole proprietor or corporation? A quick decision guide
Now that you've seen how each setup works, answer 3 quick questions to see which one usually fits. It's a starting point for a conversation with your accountant, not a final answer.
In this role, do you decide how, when and where you work, use your own tools, and carry your own costs and risk?
Do you work for several clients, or mostly for one main payer?
Do you earn more than you need to live on, and plan to leave the extra in the business for investing, slower years or retirement?
You're likely an employee
The CRA will likely treat you as an employee, even if your contract says contractor. Your income is T4 income: tax and CPP come off every pay, and you have few deductions. Incorporating won't change this, and with one payer the CRA can treat the corporation as a personal services business (44.5% tax in Ontario).
If you believe the work is truly a contract, have an accountant review it before you sign.
Sole proprietor, and be careful about incorporating
You look like a contractor, so you'd report your business income on your own tax return as a sole proprietor. With one main payer, incorporating is risky. If the CRA decides you'd really be an employee without the corporation, it can be taxed as a personal services business at 44.5% in Ontario instead of 11.2%.
Get advice before you incorporate.
A sole proprietorship likely fits for now
Report your business income on your own tax return, set aside money for tax and CPP from every payment, and keep good records. If you need most of what you earn, a corporation mostly adds costs, starting at around $2,500 a year in accounting.
Revisit it with your accountant at year-end if your income grows.
Incorporating may make sense
You have the 2 things that make a corporation worthwhile: a genuine independent business and money you can leave in it. Ask your accountant to compare the tax you'd defer with the costs, about $1,000 to $2,500 to set up and from about $2,500 a year in accounting.
In Ontario, you'd incorporate as a Health Profession Corporation with a CNO Certificate of Authorization.
When to call an accountant (or a lawyer)
Think of it in terms every NP knows. We tell patients to come in for a checkup before something hurts, and taxes work the same way. The cheapest visit to an accountant is the one before you sign a contract, not the one after a CRA letter arrives!
Good times to call:
- before you sign your first contract or switch from employee to contractor
- before you incorporate, especially if you have one main payer
- when your taxable services get close to $30,000 (GST/HST)
- when you owe more than $3,000 at tax time
- every year-end, to set your salary and dividend mix
- if the CRA sends you a letter or review
An accountant handles your tax setup, GST/HST and filings. A lawyer handles contracts and incorporation documents. The Canadian Nurses Protective Society (CNPS) can also review contracts, and it's wise to have one reviewed before you sign. Contracts can be negotiated, so ask about anything that limits where else you can work.
Frequently asked questions
Do I need to register a business to work as a contractor?
No. You become a sole proprietor automatically when you start contracting in your own name, and you report the income on your personal return. Clinics often send a T4A slip showing what they paid you. You do need a business number if you have to charge GST/HST. If you want to work under a business name instead of your own, register that name with your province.
Can I deduct conferences or courses before I start contracting?
Costs you have while genuinely setting up your business can be deductible, even before money comes in. Tuition for a program you're enrolled in is claimed through your tuition slip instead.
Is it worth incorporating for a small side contract?
Usually not. One NP at the webinar expected to keep about $10,000 a year from a virtual care contract. After around $2,500 a year in accounting fees, it wouldn't be worth it.
I'm licensed in more than one province and work virtually. Do I need a corporation in each one?
Possibly. Professional corporations are regulated province by province, so check with each province's nursing regulator before billing through your corporation there. You may also need to register your corporation in that province.
Can I keep money in my corporation if I go back to being an employee?
Yes. It can stay there, and you can take it out gradually later, for example in retirement. You can also close the corporation if you no longer need it.
Free checklist and guide
Want to keep this handy? Download our 2-page NP Contract and Tax Checklist and the full NP Tax and Incorporation Guide, with a contract rate worksheet you can fill in. They're free for everyone, no membership needed.
Watch the full session
The full recording, including nearly an hour of Q&A, is available to NP Circle members in Replays.
Not a member yet?
NPs and NP students can join NP Circle for free to watch this and other recordings.
About Bilal Rammo, CPA, CGA, MBA
Bilal Rammo is a business advisor with over a decade of experience advising nurse practitioners and other clinicians on contracts, incorporation, taxes, and financial planning. He is the founder of Rammo Accounting CPA, a virtual accounting and tax advisory firm serving clients across Canada. His background also includes public accounting experience with Grant Thornton Canada. Bilal works closely with professionals and entrepreneurs to navigate the financial considerations of starting, structuring, and growing a business, with a focus on helping clients better understand their finances and make informed decisions with confidence.
Rammo Accounting works with NPs and other professionals across Canada, including clients with Canada–US cross-border tax needs. Bilal offers free consultations, and you can reach him at Bilal@RammoAccounting.ca or through RammoAccounting.ca.
This post shares general information from our October 22, 2026 webinar, using 2026 rates. It isn't tax, legal or financial advice for your situation. Please speak with a qualified professional before making decisions.
References
- Canada Revenue Agency. (2026). CPP contribution rates, maximums and exemptions. canada.ca
- Canada Revenue Agency. When to register for and start charging the GST/HST. canada.ca
- College of Nurses of Ontario. Health Professional Corporation. cno.org
- Rammo, B. (2026, October 22). Financial Essentials for NPs: Taxes, Contracting and Incorporation [Webinar]. NP Circle. npcircle.ca
