Accounting for Realtors and PRECs: What You Need to Know
If you’re a realtor in British Columbia, managing your finances can easily feel like another full-time job. Commission income, marketing costs, vehicle expenses, and tax deadlines all add up fast. And when you add a Personal Real Estate Corporation (PREC) into the mix, things get more complex.
As a North Vancouver CPA who works with realtors and PREC owners, I’ve seen how the right structure and accounting approach can simplify year-end, reduce taxes, and create peace of mind. Here’s what you should know if you’re a realtor looking to take control of your business finances.
1. What Is a Personal Real Estate Corporation (PREC)?
A PREC allows licensed realtors in BC to operate their business through a corporation instead of personally. The Real Estate Council of BC approves the structure, and the CRA recognizes it as a regular corporation for tax purposes.
That means your corporation earns the commissions, pays business expenses, and then pays you personally as salary or dividends. This setup gives you flexibility and potential tax savings, but it also requires good bookkeeping and proper tax planning.
2. The Main Benefits of Incorporating
For most realtors, the main advantages of a PREC are tax savings, flexibility, and professionalism.
Lower corporate tax rates
BC’s small business tax rate is 11 percent on the first $500,000 of active business income. That’s much lower than the top personal tax rate, which can exceed 50 percent. By leaving some profit in the company, you can defer significant tax.
Income flexibility
A PREC lets you pay yourself a mix of salary and dividends to balance personal and corporate tax. You can also compensate family members who help with the business, as long as it’s reasonable and CRA compliant. We can discuss if there is an opportunity to structure something like this for your specific situation.
Expense deductions
With a corporation, you can deduct legitimate business expenses like advertising, vehicle costs, office rent, and professional fees directly against your commission income.
3. Common Mistakes Realtors Make with Their PREC
The structure alone doesn’t guarantee savings. A few common mistakes include:
Mixing personal and business accounts
Keep your PREC’s bank and credit cards separate. CRA auditors focus heavily on meals, travel, and vehicle expenses where business and personal lines get blurred.
Leaving bookkeeping until year-end
Waiting until tax season leads to missed deductions and higher stress. Monthly bookkeeping in QuickBooks Online or Xero keeps you organized and ready for year-end. I have some great partners who can assist with ongoing record keeping.
Paying out all profit immediately
Leaving some funds in the corporation lets you benefit from lower tax rates and build a financial cushion for slower periods. During our year end strategy meeting we can discuss the optimal amount of income to keep at the corporate level vs personal distributions.
Ignoring GST/HST rules
Once your commissions exceed $30,000 a year, you must register for GST/HST. Missing regular GST filings can trigger penalties, so it is important to keep up to date.
4. What Your Accountant Should Handle for You
Working with a realtor accountant who understands the industry saves you time and money. Your CPA should handle:
Year-end financial statements (compilation or review as needed)
Corporate tax returns (T2) and all schedules
Personal tax returns integrated with your corporate plan
Salary vs. dividend planning for optimal tax results
GST filing and reconciliations
Expense review and setup of efficient tracking systems
If your accountant isn’t helping you plan ahead or if year-end always feels like a scramble, it might be time to look for a more hands-on approach.
5. Recordkeeping Tips for Realtors
Keep these five records consistently to stay audit-ready:
Commission statements from your brokerage
Expense receipts (meals, marketing, supplies, insurance)
Vehicle logbook for mileage tracking. There are many useful apps that can help with this.
Business bank and credit card statements
A simple system can make a huge difference. Many of my realtor clients set aside 20 to 25 percent of each commission into a savings account for future tax payments. We can discuss how much you should be setting aside for taxes so you can avoid year end suprises.
6. When Does It Make Sense to Incorporate?
Timing of setting up a PREC is a very personal decision and requires some analysis of your specific circumstances to ensure it makes sense. The key factor is how much net commissions are you able to leave in the company and not use to pay for living expenses. Quite often the tipping point occurs when you’re earning more than about $100,000 in net commissions and don’t need to withdraw every dollar personally. It’s also smart if you plan to build investments or real estate within the corporation. If you start to build significant investments at the corporate level, it may be time to consider a holding company. I will discuss this in another upcoming post.
If you’re newer to real estate, you can start as a sole proprietor and incorporate once your income stabilizes. Timing the incorporation properly helps you avoid unnecessary costs while still capturing tax benefits when the time is right.
7. Final Thoughts
A Personal Real Estate Corporation can be one of the best tools available for established realtors in BC. It offers tax efficiency, flexibility, and long-term planning opportunities. The key is setting it up correctly and staying organized with bookkeeping and year-end reporting.
If you’re a realtor or PREC owner in North Vancouver, I can help you build a straightforward plan for accounting, tax filings, and long-term strategy. My goal is to keep things simple, clear, and proactive so you can focus on building your business.