Real estate agents in Ontario are finally able to operate their business using their own PREC and can now look forward to the following:
Reduction of Overall Tax
The effective tax rate applicable on the first $500,000 of active business income earned by the PREC is only 12.20%.
Defer Income Tax
Real estate agents in Ontario can now earn income in their PREC and be taxed at the Ontario small business tax rate of:
12.20% on the first $500,000 of income earned; and
26.5% on income in excess of $500,000.
Fund Non-Deductible Expenses
Incurring non-deductible expenses (meals, entertainment, life insurance, conferences, etc.) in a PREC provides for a lower tax cost compared to such expenses being incurred directly by the real estate agent.
Capital Gains Exemption
Canadian taxpayers who dispose of their shares of a Qualified Small Business Corporation (QSBC) may be eligible to use their Lifetime Capital Gains Exemption (LCGE) to shelter up to 1.25 million of capital gains for the 2024 tax year and it will be indexed to inflation starting in 2026.
Ongoing Administration Costs
The costs related to setting-up a PREC are as follows:
- Incorporation legal fees;
- OREA initial licensing and annual renewal fee;
- Annual corporate income tax returns, HST, EHT and WSIB filings;
- Annual financial statement preparation; and
- Annual corporate minutes maintenance.
Incorporation may not be recommended for every real estate agent in Ontario, as each realtor’s financial situation must be carefully reviewed.
Updated January 2025
