Evolving Tax Rules in Real Estate Industry
Consider Incorporation
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1- Am I considering all deductible expenses when preparing tax returns ?
- Commission Rebates
- Car expenses
- Work-space-in-the-home expenses
- Meals and entertainment
- Advertising expenses
- Office expenses and supplies
- Tuition courses (tax credit or tax expense)
- Membership fee (brokerage fee)
2 -What are the key GST/HST deadlines for reporting to CRA?
| Common Scenarios | Deadline | Example |
|---|---|---|
| Monthly filers | Return and amounts owing are due 1 month after the end of the reporting period. | Monthly – June 1st-30th filing period means the return is due July 31st. |
| Quarterly filers | Return and amounts owing are due 1 month after the end of the reporting period. | Quarterly – July 1st – September 30th filing period means the return is due October 31st. |
| Annual filers (individuals with 31 Dec year-end) |
Mirror the tax due dates for self-employed individuals | – GST owing is due April 30th of following year. – Filing of the GST returns is due June 15th of following year. |
| Annual filers (except individuals with Dec 31 year-end) |
Return and amounts owing are due 3 months after the fiscal year end date | 12 months ended June 30th (fiscal year end) means the payment & filing deadline is due September 30th. |
3- Detailed method vs Quick method for GST/HST filing
- CRA recognized how much work it is involved to file HST return and it offers taxpayers Quick Method to file HST returns quickly and accurately
- For a real estate agent, you would apply 8.8% to your income and subtract the 1% credit for the first $30,000 eligible supplies.
- Quick method is especially good for businesses that are labour intensive with low expenses on taxable supplies.
- A simple secret for keeping more money in your pockets!
4- Should I consider incorporation? What are the advantages of incorporation?
Why set up Personal Real Estate Corporation?
- Limited Liability With a corporation, individual shareholders are not responsible for corporate debts or other liabilities.
- Tax Benefits There are several tax benefits that corporations can enjoy. Some of the key benefits include, (a) Lower Tax Rates, (b) Tax Deferral, (c) Income Leveling, (d) Succession/Estate Planning and (e) Lifetime Capital Gains Exemption.
- Access to Capital Corporations can raise capital more easily by issuing verity of securities such as shares, bonds and debentures to raise funds. They can also reinvest profits.
- Continued Existence Corporation is a separate legal entity. Shareholders may come and go without effecting the existence of a corporation.
Disadvantages of Incorporation: The only notable disadvantage is the cost of incorporation. In addition of initial cost of registering a corporation, there is annual cost of filing corporate tax returns. Also, for complicated structures, legal cost will be involved.
- Refer to this link for more details on above advantages and disadvantages of Incorporation: https://capitaltax.ca/incorporation/
- Refer to this link for registering a corporation or call us if you need advice: https://www.canada.ca/en/services/business/start/register-with-gov/register-corp.html
5- Why should I go to a CPA for tax and accounting?
A CPA is better qualified than an accountant to perform accounting duties. CPA is training in International Accounting Standards (IAS) and Generally Accepted Accounting Principles (GAAP). CPA is also recognized by the government and private institutions as someone who is credible and an expert in the field. A Certified Public Accountant is generally allowed to perform certain duties that regular accountants are not permitted to do.