Are you an Ontario Realtor or do you know someone who is? With the passing of Bill 145 just days ago, Realtors can now incorporate and earn an income under a Personal Real Estate Corporation, also known as PREC.
The Trust in Real Estate Services Act announced on October 1st, 2020, is new legislation with major implications for Realtors.
Jesse Goossens, CPA,CA and Partner at Millards in Tillsonburg believes that all Realtors need to take a closer look at PREC and evaluate the new opportunities to see if incorporation is right for them.
“While there are many factors to consider, incorporating has the potential to provide substantial tax benefits, deferral opportunities and income splitting options.”
The Ontario Real Estate Association (OREA) has been advocating for the right to incorporate for more than ten years. They call the change a big win for Ontario’s 80,000 Realtors.
“For Realtors who will benefit from a PREC, it can significantly lower their tax burden – helping them reinvest in their business and save for the future.”
In a post entitled, “Ontario Realtors Win Big with Personal Real Estate Corporations,” OREA points out that Realtors who use a PREC may be able to:
- Achieve tax deferrals
- Benefit from the Lifetime Capital Gains Exemption for shares of a qualified small business corporation
- Income split
- Utilize holding corporations to own and manage their other investment and business activities along with their core real estate trading activities
- Retain real estate related income in the PREC to generate investment income or to be reinvested in active business activities
OREA urges all Members to seek out independent accounting and tax advice when deciding whether or not to incorporate.
“While this change is monumental, there are pros and cons to the creation and application of a PREC based on each Realtor’s personal circumstances. We welcome the opportunity to meet with Realtors and review their specific financial structure. Together we can identify opportunities for Realtors to leverage this new regulation and maximize these new benefits”