Tax Alert - New Legislation Could Offer Significant Tax Benefits For Real Estate Professionals

November 28, 2019


The Government of Ontario has recently introduced legislation, Bill 145 - Trust in Real Estate Services Act, 2019, which will amend the Real Estate and Business Brokers Act, 2002. This amending legislation will afford real estate professionals the opportunity to incorporate and earn commissions and other professional income through a personal real estate corporation. This will allow them to benefit from potential personal income tax deferrals available to other incorporated professionals such as accountants, lawyers, and doctors.

What does this mean for real estate professionals?

  • Presently, real estate professionals are taxed on all self-employed income earned in the year at personal tax rates, which in some cases can be as high as 53.5%.
  • This legislation will now permit real estate professionals to earn income through a corporation, pay tax at corporate tax rates (between 12.2% and 26.5%) on the income reported in the corporation's fiscal year, and only pay personal tax on amounts drawn out as either a salary or dividend.
  • Real estate professionals could defer personal tax on funds that they retain in the corporation, permitting them to use the deferred personal tax to fund investments and save for retirement.
  • Incorporation only provides tax advantages to real estate professionals who are legally independent contractors and not employees. Punitive tax rules apply to employees who attempt to earn their employment income through a corporation.

What are your next steps?

Bill 145 has only recently been introduced, so real estate professionals should stay tuned for further news on its passage. Further details can be found by visiting the news section of the Ontario Government or by viewing the bill itself from the Legislative Assembly of Ontario.  In the meantime, make sure to speak to a BDO advisor for further details on how incorporating could benefit your real estate operation.

The information in this publication is current as of November 25, 2019.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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