Realtor accountant in Kelowna

Commission income and the tax nobody withholds

A brokerage pays commission without deducting income tax, CPP or EI, so every deal that closes carries tax that has not been paid yet. In the valley the timing is uneven: a good spring and summer can produce most of a year’s commission, and the winter can be close to empty. Spending the spring’s commission as it arrives is how a realtor ends up with a large balance owing on April 30 and an instalment notice for the year after.

The fix is a separate account and a habit. A share of each commission cheque goes aside for income tax and GST the day it lands. Once net tax owing passes $3,000 in the current year and either of the two previous years, instalments are due March 15, June 15, September 15 and December 15. We size them to your actual year rather than the CRA’s estimate. An unincorporated realtor files by June 15 but still pays by April 30. The tax instalment calculator shows where you stand.

GST on commission

Real estate commission is a taxable supply for GST. Once your commissions pass $30,000 in four consecutive calendar quarters, registration is mandatory, and many realtors register from the start so they can recover the GST on their expenses. The brokerage then pays GST on top of your commission, and you remit it on your GST return, less input tax credits on your vehicle, marketing, desk fees and phone.

The common problems are small ones that add up: GST collected but spent, input tax credits claimed on personal costs, or a return filed on the wrong period. An unincorporated realtor filing annually with a December 31 year-end files by June 15 and pays by April 30, the same split as the personal return; a PREC files and pays three months after its year-end. GST registration covers the thresholds and the filing periods.

The BC personal real estate corporation

BC permits licensees to earn commission through a personal real estate corporation. The brokerage pays the PREC rather than you personally, and the company pays tax on its active business income at the small-business rate, which on the BC tax facts page is 11% combined. What you leave in the company is taxed at that rate until you take it out as salary or dividends, when personal tax applies. The benefit is the deferral on money you do not need to live on, not a lower lifetime tax bill on money you spend.

A PREC also brings costs: its own bank account, bookkeeping, a T2 every year, a BC annual report, and the discipline of never paying personal expenses from the company account. For a realtor who spends everything they earn, those costs can outweigh the deferral. Dividends paid to family members are also limited by the tax on split income rules, so income splitting is narrower than many expect. The PREC has to be set up to the regulator’s requirements before the brokerage can pay it, which means the incorporation, the licensing and the accounting should be planned together. The PREC accountant for BC realtors page covers the first year in detail.

The vehicle and the home office

A realtor’s car is a working tool, driven to showings in the Lower Mission, across the bridge to West Kelowna and out to Lake Country acreages. The deductible share is the business-use percentage, and the CRA expects a log to support it. A log kept for a representative period, with the odometer readings behind it, is the difference between a claim that stands and one that is cut back. Inside a PREC the choice changes: the company can own the vehicle, which may create a taxable benefit, or pay you a reasonable per-kilometre allowance for using your own. The mileage and vehicle log sets out what to record.

A home office can be claimed when it is where you mainly do the work, or when it is used only for the business and regularly for meeting clients. The claim is a share of the home’s utilities, insurance and maintenance, and for an owner of the home, claiming capital cost allowance on it is usually a mistake because of the principal residence exemption. Within a PREC the home office is reimbursed by the company rather than claimed on the personal return. Home office expenses for incorporated owners explains the method.

Marketing, gifts and the fees the brokerage charges

Listing photography, staging, signage, online advertising and brokerage desk and franchise fees are ordinary business expenses. Client closing gifts are deductible when they are a genuine business cost, but meals and entertainment with clients are generally limited to 50% of the cost. The distinction matters because a realtor’s marketing line is often the largest on the return and the one the CRA reviews first. We code each type separately in the books so the limits apply automatically.

What EverStone handles for you

One CPA, one fixed fee agreed up front:

• Personal return with T2125, or the T2 and year-end statements for a PREC
• GST registration, returns and input tax credits
• Instalments sized to your actual commission year
• Vehicle and home-office claims supported by records
• Salary and dividend planning from a PREC
• Bookkeeping reconciled to the brokerage statements

Fixed fees, fully online

EverStone is an Abbotsford CPA firm in the same province and time zone as Kelowna, and everything runs by video, phone and secure upload link, which fits a working day spent in the car. A self-employed return with schedules is commonly $250–$450 per year; a PREC is quoted after a free consultation. The fee is fixed and agreed before work starts. See what it costs.

Remote accounting for realtors from Abbotsford

Accounting for Kelowna realtors is delivered remotely from Abbotsford. There is no Kelowna office and no local team. Meetings are virtual, documents are signed electronically, and brokerage statements, receipts and the vehicle log come in through a secure upload link, so nothing waits for a visit.