Accounting for Mortgage and Insurance Brokers in BC
Brokers live on commissions that arrive late, in batches, net of splits and sometimes clawed back months afterwards. The accounting has to follow each deal from the lender or insurer statement to the bank, then to the right tax year.
EverStone CPA keeps the books and files the returns for licensed mortgage and insurance professionals throughout British Columbia, online, at a fee you see in writing first.
Quick answer: A licensed broker or agent usually starts out self-employed, reporting commission income on a T2125. Whether you can take commissions through your own corporation depends on your regulator and your brokerage, so that comes first. Commissions on mortgages and insurance are generally exempt from GST, which changes how you register and what you can recover.
Brokers and agents we work with
Our broker clients range from a newly licensed associate working under one brokerage to an owner running an office with several licensed people and an assistant on payroll.
Income shapes differ a lot. A mortgage associate may see lender commissions, volume bonuses and trailers. A life or general insurance agent may see first-year commission, renewals, overrides on a downline and the occasional chargeback when a policy lapses.
- Mortgage associates and sub-brokers paid through a brokerage
- Brokerage owners paying splits to licensed associates
- Life, health and disability insurance agents on commission
- General insurance brokers and small agencies with office staff
- Financial advisors who hold both a mortgage and an insurance licence
- Brokers with years of unfiled returns or untidy commission records
Staying self-employed or using a corporation as a broker
For brokers the structure question has an extra step. Before any tax modelling, you need to know whether your licence lets commissions be paid to a company at all.
Check the licence rules first
Whether a licensed mortgage or insurance professional may receive commissions through a personal corporation depends on your regulator and on your brokerage or agency agreement. Confirm both in writing before you incorporate, because the company is useless if the commission cannot flow to it.
Self-employed on a T2125
Commissions and expenses go on your personal return. You pay tax on the whole profit in the year you earn it, plus both halves of CPP on net earnings. For a new broker with modest income this is often the sensible place to start.
Through your own company
Once commissions clearly exceed what you spend to live, a corporation lets you leave the surplus inside at the small business rate of 11% combined in BC. You pay personal tax only on what you draw.
Personal services business risk
An agent who works for a single agency much like an employee, but through a company, can be treated as a personal services business. That loses the small business rate. Our PSB risk assessment looks at your contract and working pattern.
The incorporation calculator helps you frame it. When the answer is yes, incorporation advice sets up the company, the bank account and the first-year paperwork.
Drawing income from a broker corporation
Commission income is lumpy, so a fixed monthly draw rarely matches what came in. We plan the year’s pay around your expected deals and adjust before year-end.
A steady salary
A regular wage through payroll smooths out the swings, builds RRSP room and counts toward CPP. The company deducts it and remits source deductions every period, which suits brokers who want predictable personal cash flow.
Dividends after a strong quarter
When a run of closings lands, a dividend can move surplus out without changing payroll. Dividends are reported on a T5 by the last day of February. Paying them to a spouse who is not active in the business raises the TOSI rules.
Keeping a reserve for clawbacks
If a mortgage pays out early or a policy lapses, the commission can be taken back. We suggest keeping part of each quarter’s profit in the company until that window passes, rather than paying it all out.
Run scenarios with the salary vs dividends calculator. Money taken out without a plan often ends up as a shareholder loan, which is taxed as income if it stays unpaid past one year after year-end.
GST and PST on broker commissions
Arranging a mortgage or selling an insurance policy is generally an exempt financial service for GST. That has two sides, and both matter to your books.
No GST on most commissions
Exempt commissions carry no GST, and they do not count toward the $30,000 small supplier threshold. Many brokers whose income is all commission never need a GST number.
No credits on related costs
The trade-off is that GST you pay on office rent, software and marketing for exempt work is usually not recoverable as an input tax credit. It becomes part of the expense instead.
Where GST can apply
Separate fees for consulting, coaching other brokers, or renting desk space to associates may be taxable. A brokerage owner with mixed income needs an allocation. We review each revenue line and confirm the treatment in writing.
BC PST is a separate tax with its own registration; it is mostly about goods and a few listed services, so most brokers only meet it on purchases. Our GST filing service and the guide to exempt vs zero-rated supplies explain the difference.
Associates, splits, assistants and WorkSafeBC
A brokerage owner pays people in two very different ways, and each has its own slips and deadlines.
Licensed associates on a split
Most associates are self-employed and keep their share of each commission. The brokerage records the gross commission, the split paid out and its retained portion. Fees paid to associates are commonly reported on T4A slips by the last day of February.
Assistants and office staff
An unlicensed assistant who keeps your hours and uses your systems is normally an employee. That means payroll, source deductions, T4s, 4% vacation pay and final pay within 48 hours if they leave.
WorkSafeBC coverage
Employees require WorkSafeBC registration and premiums. WorkSafeBC may also take its own view of commissioned associates, separate from the CRA, so we check both before the first hire.
See payroll services for the assistant side, and employee vs contractor hiring for where the line sits.
Bookkeeping that follows each deal to the bank
A broker’s deposit line rarely tells you which file it came from. The books need to be built from the commission statements, not the bank feed.
Commission statements
Lender, insurer and brokerage statements list each deal, the gross commission, any split and any deduction. We book revenue from those statements and match the net deposit, so a missing payment is spotted quickly.
Trailers and renewals
Small recurring payments on older business add up across a year. We track them as their own revenue line, so you can see how much of your income now arrives without a new deal.
Chargebacks and clawbacks
When a commission is reversed, it should hit the books in the period it is taken back, linked to the original deal. That keeps your income accurate and gives you a record if the amount is disputed.
We work in QuickBooks Online or Xero through monthly bookkeeping. If several years are missing, catch-up bookkeeping rebuilds them from your statements.
Vehicles, licensing and the costs brokers can deduct
Brokers drive to clients, pay to keep their licence and spend steadily on lead generation. Each of those has its own rules.
Your vehicle
Business use of a car is claimed by the share of kilometres driven for work, backed by a log. A company-owned car brings a taxable benefit for personal use. Our mileage log and vehicle benefit calculator help you choose.
Licence and professional costs
Licensing and renewal fees, errors and omissions insurance, continuing education and brokerage desk fees are ordinary business costs. Keep each receipt, because these are the items a reviewer asks about first.
Laptops, phones and CCA
Computers and office furniture are capital items claimed through capital cost allowance over several years. See CCA classes explained for the main ones.
Timing, referral fees and instalments
A few issues come up with brokers again and again, and they are easier to handle before year-end than after.
- Commission earned in December but paid in January belongs to the year the deal funded or the policy was placed
- Referral fees paid to unlicensed people can be restricted by your regulator, so confirm the rule before you pay one
- Gifts to clients and closing presents are deductible as business promotion, with meals and entertainment limited
- Personal instalments apply once net tax owing passes $3,000 in this year and either of the two before
- Records, including deal files linked to commissions, should be kept for six years
The tax instalment calculator shows what is due and when. A new broker can avoid a surprise April bill by setting aside part of each deposit from day one.
Year-end checklist for a BC broker
Work through this list before your year-end, or before April if you file as self-employed.
- Collect every commission statement. From each lender, insurer, managing general agent and brokerage, for the full year.
- Tie statements to deposits. Each statement total should match a bank deposit after splits and fees.
- List clawbacks. Note each chargeback with the deal it relates to and the date it was taken.
- Reconcile the T4A slips you receive. Compare each slip with your own records and query any gap with the payer early.
- Issue your own slips. T4s for staff, T4As for associates and T5s for dividends, by the last day of February.
- Finish the mileage log. Total business and personal kilometres for each vehicle.
- Gather licence and insurance receipts. Renewal, errors and omissions, education and association dues.
- Review your pay. Decide the salary and dividend mix for the year before the books close.
For deadlines, see CRA tax deadlines. The T1 is due April 30, or June 15 if you are self-employed, with any balance still due April 30.
What we do for brokers, and what it costs
Brokers pay our published fees. Each engagement is fixed in writing before we start.
- Self-employed T1 with a T2125 for commission income: commonly $250–$450
- Monthly bookkeeping with commission statement matching: from $300 a month, GST and PST filing included where you are registered
- Corporate T2 and year-end statements for a broker company: quoted after a free consultation
- Payroll for assistants and an owner salary: quoted with the bookkeeping
- A one-off Advice Call on structure or licence questions: $200 + GST
The full schedule is on our pricing page, and a one-off question can go to an Advice Call. We also file the corporate T2 return, due six months after your year-end.
Questions brokers ask us
Can my commissions be paid to my corporation?+
Do I need a GST number as a broker?+
How are commission clawbacks handled for tax?+
I hold both a mortgage and an insurance licence. Is that a problem?+
Do you work with brokers outside Abbotsford?+
Brokers in larger centres often find us through Vancouver, Surrey, Victoria or Kelowna. Realtors who refer clients to you have their own page on accounting for realtors, and property managers have theirs.
Written and reviewed by a Chartered Professional Accountant at EverStone CPA, an Abbotsford CPA firm working remotely with businesses across British Columbia. Updated . You can read client reviews before you get in touch.
Related reading
More on the questions brokers bring us.
Send an enquiry
Tell us whether you hold a mortgage licence, an insurance licence or both, and whether you own the brokerage. A CPA replies by email within one business day with the next step and a written fee.