Pending real estate incorporating laws may save realtors tax dollars

Historically, real estate agents operating in Ontario have not been permitted to incorporate, because the Real Estate and Business Brokers Act to which they are subject, prohibits them from incorporating their businesses using a Personal Real Estate Corporation (PREC).  Many have considered this unfair, given incorporation is permitted for similar professionals in Ontario such as doctors, lawyers, architects, engineers and accountants. In addition, British Columbia, Quebec, Manitoba, Saskatchewan, Alberta, and Nova Scotia all allow realtors to incorporate.

Why does it matter? Incorporation allows for benefits such as tax deferral and income splitting. While these benefits may be scaled back in the near future due to the federal government’s proposed tax changes, there are still many benefits to incorporation.

Bill 104, the Tax Fairness for Realtors Act, has been introduced to permit a PREC to be registered for a real estate broker or salesperson. The bill is headed for its third reading and if passed, will become law. Once passed, realtors may be able to incorporate immediately or shortly after the bill receives the royal ascent.

For more information about the benefits and obligations of incorporating your real estate business, please contact your Zeifmans advisor or David Posner, CPA, CA, Partner at dp@zeifmans.ca or 416.256.4000.