The PREC owner's first full tax year

Once your commissions are paid to a personal real estate corporation, one obligation becomes three. The corporation charges and remits GST/HST on the commission. The corporation pays tax on what is left after the brokerage’s split and its own costs. And nothing reaches you personally until you pay yourself, by salary or dividend, on purpose rather than by default. The first full year is about the habits those three create — a remittance calendar, records the deductions rest on, and a compensation plan set before December rather than discovered in April.

The brokerage pays the corporation, and nothing is withheld

Before the PREC, the brokerage paid you and the commission landed on your T1 as self-employment income. Now it pays the corporation, and the money stops in an account that is not yours. Nothing is withheld at either step. What changed is that a separate taxpayer has its own return, its own year-end and its own deadlines.

The corporation is taxed on active business income: the commission that reaches it, less the costs of earning it. Federally that is 9% on the first C$500,000 for an eligible CCPC in 2026, plus your province’s rate — applied to what is left, not to the gross figure on your board’s year-end statement. The gap between that rate and your personal bracket is a deferral, not a discount, and how the money comes out to you is the annual decision.

The calendar is the corporation’s now, and it front-loads. The T2, its income tax return, is due six months after year-end — June 30 for a December 31 year-end — but the balance of tax is generally due two months after, three for many CCPCs claiming the small-business deduction. Your first corporate year often escapes instalments, because the calculation looks back to figures you do not have yet. Personally they start once net tax owing tops C$3,000 (C$1,800 in Quebec) in the current year and in either of the two years before it. The dates are here.

The GST/HST on your commission was never your money

The corporation is a separate person for GST/HST, so it registers in its own name; a registration you held personally does not follow you in. Registration is generally mandatory once taxable supplies pass a legislated small-supplier threshold, and a commission practice passes it fast enough that most PRECs register from day one.

The mechanics are ordinary: the corporation charges tax on the commission at the rate for the place of supply, claims input tax credits on the tax it paid on its own costs — marketing, desk fees, the car, software — and remits the difference, one month after the period ends for monthly and quarterly filers.

What throws people is that you may never issue an invoice. The brokerage’s commission statement generally sets out the tax alongside the split and the deductions, and it arrives in the same deposit as the commission. That changes the paperwork, not the obligation — the corporation still reports what it charged, and the tax collected is not its revenue at any point. Read your first three statements closely rather than assuming what they show. Whether the quick method would beat claiming credits the ordinary way is a separate test, and a marketing-heavy practice is not the obvious winner.

The car is your biggest recurring claim, and the log is what supports it

Only the business-use share is deductible, and a kilometre log that separates showings, listing appointments and client meetings from personal driving is what actually supports the claim. That percentage multiplies every vehicle number you will ever claim, and it is the record most often reconstructed in March. Driving from home to your brokerage office is generally personal.

If the vehicle meets the tax definition of a passenger vehicle — most cars a realtor drives do — the capital cost you can depreciate is capped at C$39,000 before tax for a 2026 acquisition, C$38,000 for one in 2025. Pay more and the excess goes nowhere. Deductible lease payments and interest run into their own prescribed ceilings. The buy-versus-lease mechanics are the ones the trades face on a truck, with one difference: a work truck can fall outside the passenger-vehicle definition; the car you show houses in generally cannot.

Corporate ownership is usually the expensive route. Where the corporation owns or leases a car you also drive personally, the CRA generally assesses a standby charge and an operating benefit on your T4 — and the standby charge is generally computed from what the corporation actually paid, not the capped amount you could depreciate. An expensive car can hand you a benefit larger than the deduction it earned. Keeping it in your own name and taking a per-kilometre allowance instead, at the rate the CRA sets each year, avoids all of that.

Marketing deducts in full; the dinner after the closing is halved

Advertising is one of the few large costs here that deducts without a haircut: photography, signage, staging, mailers, portal fees, the brokerage’s marketing levies. Entertainment is not. Business meals and entertainment are generally capped at 50%, so the closing dinner and the standing coffee with a referral source cost the full amount and deduct half. A branded giveaway is generally advertising; a gift that reads as entertainment is treated as entertainment, at half. Club dues and most recreational-facility costs are denied outright, which answers the golf membership question.

Paying a spouse works, but the share rules come first

A spouse who runs your listing calendar, chases conditions and keeps the books is doing real work, and paying for it is the cleanest split available to a PREC owner. Salary is not split income, so the tax on split income never reaches it; the whole test is whether the amount is reasonable for the job. Dividends need an exclusion instead, and the excluded-share door carries a carve-out for service businesses — generally less than 90% of the corporation’s business income can come from services — so which door is open is worth settling before the first pay run.

Check who is permitted to own shares first. The PREC is a creature of provincial real estate legislation, and the rules differ by province — who must control the voting shares, whether family members may hold non-voting equity, what your regulator has to be told. A plan that depends on your spouse holding shares can fail on the regulator’s rules before it reaches the CRA’s.

Most PREC files sit at the cooler end of the PSB test

One paragraph, because incorporated professionals hear about this constantly. A personal services business is a corporation sitting between an individual and what would otherwise be that individual’s employer, and the finding costs the small-business rate and nearly every deduction. The relationship tested is with whoever pays the corporation — for a PREC, the brokerage. Most realtor files sit at the cooler end: you find your own clients, set your own hours and carry your own marketing spend, so the chance of profit and the risk of loss are yours. Know the test exists and look again if your brokerage arrangement is unusual.

A C$480,000 commission year, dollar by dollar

Illustrative, round numbers, December 31 year-end, no provincial rate applied. The point is where the obligations land, not what they total.

Your board reports C$480,000 of gross commission. The corporation never sees all of it: the brokerage’s split and desk fees take C$96,000, so C$384,000 arrives. The GST/HST charged on the commission arrives too, and is not revenue at any stage. Against the C$384,000, the year runs:

• Marketing, photography, signage and portal fees — C$42,000, deductible in full.
• Client meals and entertainment — C$6,000 spent, C$3,000 deductible at the 50% cap.
• Vehicle, at the business-use share your log supports — C$12,000.
• Your spouse’s salary for real admin work — C$40,000, plus employer CPP.
• Licensing, board dues, insurance, phone and software — C$15,000.
• Professional fees — C$5,000.

That is C$120,000 out the door before the employer’s CPP share, and C$117,000 deductible, leaving C$267,000 before your own pay. Take C$140,000 as salary and the corporation deducts it, leaving C$127,000 of active business income taxed federally at 9% on the first C$500,000 for an eligible CCPC in 2026, plus your province’s rate. You pay personal tax on the C$140,000 at your bracket, and next year’s RRSP room follows from the T4.

So the headline resolves into four things: C$96,000 that was never the corporation’s, C$117,000 of deductions, C$140,000 taxed in your hands this year, and C$127,000 left inside at corporate rates. Sales tax sits outside all four. That last figure is deferred, not saved, and it carries the C$3,000 of entertainment the corporation cannot deduct — which is what a 50% cap feels like.

What Cadence does

We set the first year rather than reconstruct it: the corporation’s own GST/HST registration, a chart of accounts that keeps the brokerage split, the commission and the sales tax separate, the vehicle question answered before you sign, and the compensation plan fixed before year-end. Returns and the remittance calendar sit in GST/HST and payroll work; the salary-versus-dividend call, the spouse’s pay and the car sit in tax planning and advice. PRECs sit in the consultants, agencies and professional services group, alongside other commission earners — income that moves through the year, a spouse to pay properly, and a car in the middle of it.