Real estate professionals · PRECs
Tax planning for real estate agents with a PREC
For Ontario salespersons and brokers who run their business through a Personal Real Estate Corporation: RECO's ownership rules, commission timing, HST, the car, and what family shareholders can and cannot do for your tax bill.
Since October 2020, Ontario salespersons and brokers have been able to run their business through a Personal Real Estate Corporation. The tax logic is the same as for any professional corporation: income left inside the company is taxed at the small business rate, and you pay personal tax only on what you take out.
What makes a PREC different is the set of rules around it. RECO's requirements decide who can own shares and who can pay the corporation. Commission income arrives unevenly. HST moves from you to the company. And the two things agents most often expect from incorporating, splitting income with family and writing off the car, are both narrower than they sound.
You, as the registrant, must own all the voting and equity shares, directly or through a holding company structured the same way, and hold every director and officer position. Certain family members may hold non-voting, non-equity shares. The PREC may receive remuneration for trading in real estate only from the brokerage that employs you, you remain registered with RECO personally, and RECO must be notified of the corporation's name and address. There is no required name, but the PREC cannot hold itself out to the public as trading in real estate. We set up the share structure with your corporate lawyer so the tax plan and the RECO rules agree from day one.
Once your brokerage pays commissions to the PREC, they are corporate income, taxed at the combined small business rate on the first $500,000 of active business income. The year-end you choose decides which year a closing falls into, when the corporation's balance is due, and, for 2026, how much of Ontario's July 1 rate cut you get this year. How the 2026 rate change works →
A strong spring and a quiet winter do not have to mean a high-tax year followed by a low one. The PREC lets you pay yourself a steady salary, dividends, or a mix, and hold the rest. Salary builds RRSP room and CPP; dividends do not. The right mix is an annual calculation, not a one-time decision. Salary vs. dividends →
When the PREC earns the commissions, the PREC is the one making the taxable supply. It generally needs its own HST registration and charges HST to the brokerage, and your personal HST account has to be dealt with cleanly at the changeover so nothing is reported twice or missed. HST/GST compliance →
If the PREC owns or leases your car, personal use creates a taxable standby charge and operating benefit, and the corporation's deductions are capped by the CRA's limits on passenger vehicle cost, lease payments and interest. Often the simpler answer is to own the car personally, keep a logbook, and have the PREC pay you a tax-free per-kilometre allowance. Which one wins depends on the car, the price and your kilometres, so we run both. Leasing? Ask for my lease-deduction calculator, which applies the CRA's lease-limit formula to your own numbers.
RECO allows certain family members to own non-voting shares, but the tax on split income (TOSI) generally taxes dividends on those shares at the top personal rate. The main ways out: the family member actually works in the business on a regular, continuous and substantial basis (generally about 20 hours a week) in the year or in any five prior years; you are 65 or older and the dividends go to your spouse; or, for adults 25 and older, the amount is a reasonable return on what they have actually contributed. The excluded-shares exception does not help a PREC, because it needs voting shares and is not available to a corporation earning almost all of its income from services.
Once money accumulates, the questions shift: whether a holding company should own your PREC shares, how investment income inside the corporation affects the small business rate, and how you eventually get the money out. Do you actually need a holding company? →
When a PREC is worth it, and when it is not
The benefit comes almost entirely from income you leave in the corporation. If you need every dollar of commission to live on, a PREC mostly adds a second tax return, a second set of books and annual corporate costs. If you consistently earn more than you spend, the deferral can be worth thousands of dollars a year and compounds over a career.
One structural point is worth checking before you incorporate. The PREC works for tax because most agents are independent contractors of their brokerage, not employees. If your arrangement looks more like employment, for example a salaried role on a team, the corporation's income could be treated as a personal services business, which loses the small business rate and most deductions.
Four things to settle first
How much would you actually leave in the company each year? The incorporate-or-not calculator gives you a first answer.
Confirm it will pay commissions to the PREC and what paperwork it needs from you, including the HST number.
Who holds what, whether a holding company sits above the PREC, and what TOSI would do to any family dividends.
It is easy to choose and harder to change, and it drives your filing, payment and bonus deadlines from then on.
Common questions
You stay registered personally and stay employed by your brokerage. The PREC itself is not registered; RECO is notified of its name and address, and your brokerage pays your commissions to it.
RECO's rules allow certain family members to hold non-voting, non-equity shares. Whether paying them dividends saves any tax is a separate question, and under TOSI the answer is often no unless they work in the business or one of the other exclusions applies.
Often, provided its share structure and directors can be brought in line with the PREC rules. The existing shareholdings and any assets already inside it need to be reviewed first.
Not automatically. A company car brings a taxable benefit for personal use and capped deductions; a personal car with a per-kilometre allowance is often cleaner. We compare both on your actual car and kilometres.
It depends on whether you are setting up a new PREC or need ongoing T2, HST and compensation work. You will get a range in the first conversation, before committing to anything.
Book a free consultation. I will look at your commission income and spending and tell you honestly whether the corporation is earning its keep.
General information, current as at October 2026. It is not advice on your situation, and reading it does not create a professional relationship.
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