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Tax Issues for Real Estate & Property Management Businesses
Need a yearly summary of income and expense deductions. Report income on T4A (net of HST).
Business Deductions for Real Estate & Property Management Businesses
Tax deductible expenses include:
- Home office and office expenses
- Automobile expenses
- Gift and meals to clients
- Referral fee (proof of fee paid needed)
- Memberships and Professional Fees
- Professional Insurance
- Courses – You can include your tuition expense as a tuition credit on your personal tax return (Schedule 11, to be more specific). or you can include your tuition expense as an actual Expense on your personal tax return (T2125) – ask us.
- Commission paid
HST Issues for Real Estate & Property Management Businesses
- If you earn more than $30,000 in commissions, you will be required to register and remit HST to the CRA. Ask us.
- Your provider should exclude HST from your T4A income.
- If you pay HST on a yearly basis, you may be required to pay HST instalments during the year. Ask us.
Accounting Issues for Real Estate & Property Management Businesses
- Trust account tracking – keep separate accounts for the company and the buildings.
- Use an appropriate property management system. Ask us about your options.
- CRA requires withholding tax to be paid during the year for non-resident investors/ property owners. Ask us.
- Use tracking categories when tracking income and expenses from multiple properties. Ask us.
- Set up a proper chart of accounts to fit your operations and for each property.
Ontario Personal Real Estate Corporations (PREC)
As of October 1, 2020, Personal Real Estate Corporations (PREC) has been permitted in Ontario. It means that individual Ontario real estate agents will now be able to incorporate their business. This would allow them to offer more services to clients, invest in new technology, and create jobs in their community. More importantly, this opens up avenues for better tax planning for Ontario realtors.
Criteria for Personal Real Estate Corporations (PREC)
- The corporation is incorporated or continued under the Business Corporations Act.
- All of the equity shares of the corporation are legally and beneficially owned, directly or indirectly, by the controlling shareholder.
- The sole director of the corporation is the controlling shareholders.
- The president, being the sole officer of the corporation, is the controlling shareholder.
- Each non-equity share of the corporation is,
- legally and beneficially owned, directly or indirectly, by the controlling shareholder,
- legally and beneficially owned, directly or indirectly, by a family member of the controlling shareholder, or
- owned legally by one or more individuals, as trustees, in trust for one or more children of the controlling shareholder who are minors, as beneficiaries.
- There is no written provision by agreement or otherwise or arrangement that restricts or transfers in whole or in part the powers of the sole director to manage or supervise the management of the business and affairs of the corporation.
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