Income Splitting for Real Estate Brokers

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As a self-employed Realtor® you pay tax based on marginal tax rates. Once you reach each threshold amount, the next dollar you earn is taxed at a higher amount. Individual tax rates in Ontario increase gradually up to a massive 49.5% – almost HALF your earnings.

Corporations pay a flat rate of 15.5% tax on net earnings up to $500k – so you can significantly cut your tax rate when you incorporate. And that’s not the only way you’ll save money. If you support others, incorporating your business also allows you to take advantage of another valuable planning strategy: income splitting.

Here’s how it works. Instead of receiving all your income as an individual, and paying the highest rate of tax on it, you can split that income with other members of your family (who must be aged over 18). You can do this by making your spouse or adult children shareholders in your business and distributing money to them in the form of dividends, or by hiring them to work in your business and paying them a fair salary (which you can claim as a business expense).

These take advantage of the different tax brackets for individuals. As long as the other members of your family pay a lower rate of tax than you then you’ll pay less tax overall on the income, and have more to spend as a family. Each year you can simply collect your earnings in your company, and then redirect them to other family members in the most tax-efficient way.
Of course, the Real Estate Council of Ontario (RECO) won’t allow you to incorporate your business unless you set up a brokerage. And the thought of all the cost and hassle involved is enough to stop many Realtors® in their tracks.

• There’s so much to do to establish a brokerage, where do I even start?
• Can I afford all the costs of running a brokerage all on my own?
• Will I have time to run an office and still concentrate on selling real estate?

Realty Point has the right solution for you.

We provide an innovative franchise solution that takes care of all those worries. We manage everything involved in setting up your brokerage, so all you have to do is sign.

We provide all the facilities you need at a fixed low cost. And we handle all your ongoing administration, so you can get on with doing what you do best.

Contact us today for your confidential free consultation. 1-800-410-8516

Realty Point. You Sell Real Estate. We Take Care of The Rest.