A personal real estate corporation, or PREC, allows a real estate agent to earn their business income through a corporation. Several o provinces, including British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia and, most recently, Ontario, allow PRECs.
Several other professionals in Ontario, like doctors, dentists, lawyers, accountants, social workers, engineers and architects, can also establish professional corporations.
A PREC should not be confused with a corporation set up by a real estate investor to own real estate. A personal real estate corporation is only for a real estate agent.
Real estate investors may not benefit from setting up a corporation to hold their real estate investments. An example of when incorporation makes sense is if someone has an existing corporation with accumulated savings they want to invest in real estate. Or an investor who wants to buy and sell real estate—flipping properties—may benefit from a lower tax rate on this corporate business income. Some other scenarios may include investing in commercial real estate or establishing a not-for-profit corporation as part of a family cottage succession plan. I have written recently aboutwhether you should buy real estate through a corporation.
Tax deferral, not tax savings
Getting back to PRECs, whether a realtor should incorporate depends on their circumstances.
One of the primary benefits to incorporation for a realtor, or anyone else, is the ability to defer income tax. The tax rate on small business income up to $500,000 in Ontario is 12.2%, and comparable in other provinces. Profit left in a PREC generally qualifies for this low rate of tax. By comparison, personally earned income at $50,000 in Ontario is taxed at 29.65%; at $100,000, it’s 43.41%; $150,000 at 44.97%; $200,000 at 48.19%; and over $220,000 at 53.53%.
So, for a high-income Ontario realtor, incorporation could result in tax deferral of up to 41.33%, based on the top personal rate of 53.53% less the corporate small business rate of 12.2%. Note that I use the term tax deferral, not savings, as eventually personal tax becomes payable to withdraw accumulated corporate savings. After-tax profits in a corporation can be paid out as a dividend at rates ranging from 0% up to 47.74%, depending on the recipient’s other income for the year.
Income splitting with family members
Ontario realtors can name family members as shareholders of their PREC as well, but the realtor must own all voting shares of the company. Non-voting shares can be issued to others, and dividends can be paid to them. However, under Tax on Split Income (TOSI) rules that have applied to all Canadian private corporations since 2018, most dividends paid to family members will be considered split income and taxable at the top tax rate, negating the income-splitting benefits.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.
Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.
The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.
Wednesday was the last day for advance voting, which started on Oct. 10.
More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.
Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.
An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.
This report by The Canadian Press was first published Oct. 17, 2024.
