REALTOR - Professional Real Estate Corporation (PREC) - Accounting
Forming a PREC is an important decision that will affect your business and personal finances. If you're considering incorporating to take advantage of certain tax benefits, make sure it's the right move for you by weighing all considerations before filing!
InCOME Splitting & income smoothing
Income splitting is a strategy that allows you to share income with family members. This practice has significant potential benefits, but it also comes with some risks and drawbacks when not done properly - typically decided upon by directors and the Accountant in their annual tax planning sessions.
The advantage of a sole proprietorship is that you take all your earnings into personal income in the year they are earned. With corporation, this isn't necessary because we have marginal tax rates which reduce our total burden on taxes over time- avoid those pesky peaks and valleys!
Tax strategies and deferrals
When you incorporate, your company is able to take advantage of the tax code and pay only 12.2% instead of taking income personally, which could lead to higher rates as high as 53%.
We know that corporations have a number of tax strategies available to them which are not available for sole proprietorships. In addition, we can tap into different strategies using life insurance and capital gain exceptions as well as other benefits such as holding companies or subsidiaries in order to maximize your deductions so you can take advantage too!
The small business deduction is a great incentive for corporations looking to start up and grow. The first $500,000 of taxable income is taxed at 12% while any additional funds collected from dividends paid out by the company remain exempt from all taxation until they're injected back into your pocket as cash--in other words, you don't pay another dime!
Home and auto loans
The Canada Revenue Agency allows you to borrow money from your own corporate entity for the purposes of purchasing a car or house. The interest rate on these loans is usually very low, so it's worth checking out if this option could work well with what you want in mind!
If this sounds like what's right up your alley give us a call today!
You started a Realtor business to sell real estate properties not to do Accounting.
Let us help you build a solution for your Accounting and Tax needs.
FAQ’s - Real estate EDITION
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You can tap into Dividends and other asset protections that are available under an Incorporation. So generally, it’s better to incorporate but this really depends. See more information here https://capexcpa.com/incorporations
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Working in real estate means dealing with large sums of money on a regular basis. That's true whether you:
run a real estate agency employing commissioned salespeople
manage commercial or residential real estate for clients
handle the accounts of a housing association
run a building construction firm
manage an investment trust
provide residential sales and lettings services
In all of these roles, well-managed real estate accounting can make all the difference. Mistakes could cost you (or your clients) a lot of money.
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An accounting firm that specializes in real estate accounting will help you follow all the real estate tax rules. They will also be able to:
structure your business in the most tax-efficient way
give you guidance on how to avoid unnecessary expenses
use online accounting software to share updates, reports and forecasts with you
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Long ago, separate accounts made it easier to keep track of transactions for different properties but could become unmanageable as the portfolio grew.
Nowadays, accounting software can accurately track the expenses for multiple properties all within a single bank account.
So, do you need a separate bank account for every property? It’s probably unnecessary
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Yes you can pay your spouse a reasonable salary. What’s reasonable? If you were to hire someone to do the exact job would you pay that amount to them? if so then it generally passes the reasonable test. Your accountant can help you decide this and plan better.
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Yes, dividends are very useful for tax planning if deployed correctly. Family members who are shareholders and are involved can receive a reasonable dividend from the corporation. Generally, TOSI rules stipulate that the family member must work at least 20 hours a week continuously in the business.
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Yes sure. Just provide us with the Trial balance or the Profit and Loss and Balance sheet and we’ll put together the T2 GIFI statements for you that is required for incorporated individuals or a T2125 schedule while completing your personal taxes.
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Yes, if you are using the Home office to meet clients and conduct business. These days the clients don’t even have to come to your house physically thanks to Zoom.
You can claim a portion based on the total squarefeet of your house and the total squarefeet of your office taken as a % and multiplied by the expense is the total claim amount.
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Yes if you want to claim expenses related to automobile expenses. The Vehicle log will be required in the case scenario of a CRA Audit or they may disallow the expenses.
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If it’s a general question during the year you can send us an email or book a call with us.
If it requires us to calculate something then it’s a billable event for us.
So if it takes less than 10-15 minutes we don’t even charge for that.
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Lifestyle Tax Strategy is a 2-hour session we do with Robot Transcription and ask you very particular questions related to your budget, credit, wealth, and future planning.
We use all the keywords and learnings from this session to maximize your tax return and help grow your wealth.
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Yes.
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