Realtors
Why PERSONAL REAL ESTATE CORPORATION (PREC) is Important?
Realtors now have the opportunity to incorporate with the passing of Bill 145, Trust in Real Estate Services Act, 2020, and can now earn an income through Personal Real Estate Corporation (PREC) in Ontario. With the new rules and regulations in place, realtors can now benefit from PREC in Ontario which allows them to defer personal tax and pay a corporate tax rate instead. With fewer taxes, you retain more of your income. Income that can be invested or used to give you that early retirement you’ve been dreaming of.
Another benefit of incorporating is tax deferral opportunity. Realtors who are incorporated can now defer their tax payments by leaving a share of their earnings in the corporation and only being taxed once those funds have been withdrawn.
Income splitting is beneficial due to the further tax savings it brings. Income splitting is a process within a corporation that allows the corporation to pay a fair salary to a family member. By utilizing family members such as your spouse, parents or children, in the lower tax brackets, you can bring down your family’s overall tax burden by income splitting using your corporation.
Going down the incorporation road is an intensive process and can become quite cumbersome. Costs incurred while establishing PREC are deductible expenses against your income and we at BRG Accounting and Tax Service are here to provide you with the services and guidance you need.
Low Corporate Tax Rate
One of the greatest advantages of incorporating is being able to leave money inside a corporation and pay only 12.5% corporate taxes instead of taking the income personally and being taxed at your personal tax rate which could be as high as 53.53%.
Income Smoothing
One of the disadvantages of a sole proprietorship is that you must take all your earnings into personal income in the year in which you earn the commission. With a corporation you have the ability to smooth that income over a longer period of time.