For Realtors
Tax for Real Estate Agents & PRECs in Ottawa
A personal real estate corporation (PREC) is a corporation an Ontario realtor can use to receive their commission income, allowed since the Trust in Real Estate Services Act (TRESA) came into force in 2020. For agents earning more than they need to live on, a PREC can defer a large amount of tax, because income left in the company is taxed at the low small business rate instead of your top personal rate.
Nour & Daniels Tax helps Ottawa real estate agents decide whether a PREC makes sense, set it up correctly, file the corporate return and HST, and capture the deductions commissioned agents so often miss.
Get In Touch With An Expert ›
from 80+ Google reviews
The Basics
What is a PREC, and what are the rules?
A PREC, or personal real estate corporation, is a private corporation through which an Ontario realtor receives the commissions they earn. The brokerage pays the agent's commissions to the PREC instead of to the agent personally. Ontario sets specific rules for how a PREC must be structured, and they matter because a PREC that breaks them cannot legally receive commission.
| PREC rule | What it means for you |
|---|---|
| Controlled by one registrant | The controlling shareholder must be you, a realtor registered with RECO. The PREC receives commission only for your trades, not another agent's. |
| Family can hold non-voting shares | Your spouse, children, or parents may own non-voting, non-equity shares, which opens limited income-splitting planning (subject to the tax-on-split-income rules below). |
| No RECO registration needed for the PREC | The PREC itself does not register with RECO, as long as it is controlled by a registered agent. |
| Notice to RECO required | You must notify RECO that you are using a PREC, and keep the arrangement compliant with TRESA. |
| Agreement with your brokerage | Your brokerage must agree to pay your commission to the PREC, documented properly. |
We coordinate the tax and corporate side. Your real estate lawyer handles the incorporation documents and RECO notice, and we make sure the structure works for tax before anyone files anything.
Should you set up a PREC?
A PREC helps most when you consistently earn more than you spend, because the benefit comes from leaving money in the corporation. If you spend everything you make, a PREC may add cost without much gain.
- Tax deferral: Commission income kept in the PREC is taxed at the low small business rate rather than your top personal rate. The difference stays invested and working until you withdraw it.
- Income smoothing: Real estate income swings year to year. A PREC lets you pay yourself a steady amount and leave the rest in the company, evening out your personal tax.
- Investing retained earnings: Money left in the PREC can be invested, giving you more after-tax capital to grow than if it had been taxed personally first.
The honest test is your numbers. We model your income with and without a PREC so the decision is based on real dollars.
Get In Touch ›
An Ottawa agent earns $240,000 in commissions but only needs about $130,000 to live on. Paid personally, the entire $240,000 is taxed at personal rates, with the top portion taxed heavily. Through a PREC, she draws what she needs and leaves the remaining roughly $110,000 in the corporation, where it is taxed at the low small business rate. The tax she defers stays invested instead of going to the CRA this year. The benefit is real precisely because she does not need all the income right now.
Money On The Table
The deductions agents most often miss
Commissioned agents spend constantly to win and close listings, and a surprising amount of it is deductible when tracked. These are the write-offs we routinely find missing, whether you operate personally or through a PREC.
Vehicle
The business-use share of fuel, insurance, repairs, and lease or loan costs, based on a mileage log of your showings and client driving.
Marketing and advertising
Listing photography, signage, online ads, mailers, social media, and your website.
Staging and listing costs
Staging, cleaning, and prep you pay for to sell a property.
Brokerage and desk fees
Desk fees, brokerage splits and charges, and franchise fees.
Board and licensing dues
RECO, OREA, and local real estate board fees, plus your licensing costs.
Home office
The business-use portion of a home office where you run your practice.
Phone, CRM, and software
Your business phone, CRM, e-signature, and transaction software.
Client appreciation
Closing gifts and client events, within the limits the CRA allows.
Professional development
Courses, designations, and conferences that build your business.
HST, income splitting, and the fine print
Two rules trip up realtors more than any others: HST on commissions, and the limits on splitting income with family.
- HST on commissions: Real estate commissions are subject to HST, and once you pass $30,000 in revenue over four consecutive quarters, registration is mandatory. Almost every full-time agent is registered. We handle registration, filing, and the input tax credits on your expenses. (Source: CRA: GST/HST.)
- Income splitting and TOSI: The tax on split income (TOSI) rules limit paying dividends to family members who are not genuinely active in the business; amounts caught by TOSI are taxed at the top personal rate. Family share ownership in a PREC can still help in specific situations, but only when planned within these rules. We plan it carefully rather than promising splits that the CRA would reverse.
- Salary versus dividends: Once your PREC is running, how you pay yourself affects your tax, your RRSP room, and CPP. We model the mix every year.
How It Works
How we help real estate agents
Should-you-incorporate review
We model your commission income with and without a PREC and tell you plainly whether it is worth it for you this year.
PREC setup, coordinated
We work alongside your real estate lawyer on the structure and the RECO notice, and set up the tax and bookkeeping side correctly from day one.
HST and bookkeeping
We register and file your HST, and keep clean books so every deduction is captured through the year.
T2 and compensation planning
We file your corporate return and plan your salary-versus-dividend mix to fit your personal needs.
Year-round planning
We smooth your income across busy and slow years, plan instalments, and keep the structure working as your business grows.
Be Prepared
What to bring
Whether you are weighing a PREC or already have one, these help us help you faster.
- Your commission statements from your brokerage
- Last year's tax return and notice of assessment
- Records of your business expenses and HST
- PREC incorporation documents, if you have a PREC
- Your RECO and board membership details
- An estimate of what you need to draw personally
Help Centre
Realtor and PREC tax questions
What is a PREC?
A PREC, or personal real estate corporation, is a corporation that an Ontario realtor can use to receive their commission income. Allowed since the Trust in Real Estate Services Act (TRESA) took effect in 2020, it lets the brokerage pay your commissions to your corporation instead of to you personally, which can defer tax. It must be controlled by you as a RECO-registered agent. (Source: RECO.)
Will a PREC actually save me tax?
It defers tax rather than erasing it, and the benefit depends on whether you leave money in the corporation. If you earn well above what you spend, a PREC can keep the surplus taxed at the low small business rate until you withdraw it, which is a meaningful deferral. If you spend everything you earn, the savings may not justify the cost. We run your numbers both ways before you decide.
How much do I need to earn before a PREC is worth it?
There is no single magic number, because it depends on how much of your income you can leave in the corporation. As a rule of thumb, the more your commissions exceed your personal spending, the stronger the case. We look at your actual income and lifestyle rather than applying a generic threshold.
Can I pay my spouse or family through my PREC?
Sometimes, but carefully. Family members can hold non-voting shares of a PREC, but the tax on split income (TOSI) rules tax dividends paid to family who are not genuinely active in the business at the top personal rate. There are situations where family ownership still helps, but only when structured within the rules. We will not set up a split that the CRA would simply reverse.
Do I charge HST on my commissions?
Yes. Real estate commissions are subject to HST, and once your revenue passes $30,000 over four consecutive quarters, registration is mandatory, which covers essentially every full-time agent. We handle your registration and filing and make sure you claim input tax credits on your business expenses. (Source: CRA: GST/HST.)
I already have a PREC but I am not sure it is set up right. Can you review it?
Yes. We review how your PREC is structured, how you are paying yourself, and whether your filings and HST are correct, then fix what needs fixing. If prior years need adjusting, we handle that too.
Find out if a PREC is right for you
Tell us roughly what you earn and what you need to live on. We will model the PREC decision with your real numbers and handle the setup and filings if it makes sense.
Get In Touch With An Expert ›