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REALTORS® now have the ability to utilize a PREC. Learn about the benefits, some questions you should ask yourself together with details and pricing for Miller Thomson’s services to REALTORS® in Setting up a Personal Real Estate Corporation.
There are three reasons you should consider incorporating a PREC before the end of 2020:
- Avoid double paying the Employer Amount of Canada Pension Plan (CPP) Contributions – a savings of up to $3,166.45. As a self-employed individual, you are obligated to make both the employee and employer contributions towards the CPP. If you expect to earn more than $123,200 in 2021 and that income is split between yourself as an individual and a PREC, your PREC may be required to pay up to the maximum CPP employer contribution amount again, even if you have already paid the maximum amount as a self-employed individual. By ensuring your PREC is operational as of January 1, 2021, you can cap your CPP payments for all of your income to the 2021 maximum of $3,166.45.
- Avoid filing two income tax returns and two HST filings in 2021. You can save administration, accounting and filing costs and efforts by ensuring all compensation for your real estate trading services is received through your PREC starting January 1, 2021.
- Start the tax savings immediately for any income you may receive in 2020. If you expect any compensation or commission to be paid to you in the balance of 2020, you may wish to ensure that your PREC receives as much of that income as possible so it can be taxed for income at a lower tax rate. Your accountant can then advise you immediately whether to leave that money inside the PREC and/or how to most efficiently distribute that money out to you or your family members.
The sooner you form your PREC, the sooner you will be in a position to realize the benefits.