Tax Tip Thursday

For Real Estate Agents

Since we are in a housing boom, I thought I would do a show just for real estate agents!

I want to share some of the deductions that can save you taxes. There are a lot, so I chose a few that I get questioned about the most.

Commission Rebates to Clients

Sellers frequently ask their Realtor for a break on their commission. Commission Rebates are 100% deductible to the Real Estate Agent! Realtors must remember that they must keep the HST they collected on the full commission and only provide the rebate, net of HST.

Real Estate Tuition and TREB/RECO/OREA/CREA Dues

There are two options for the deduction of tuition for a real estate agent:

  1. You can include your tuition expense as a tuition credit on your personal tax return, but this is only non-refundable tax credit. You save 15% of your tuition claim. This is not necessarily the best option and, although it may result in tax savings, it doesn’t benefit the taxpayer as much as a direct expense would.
  2. You can also include your tuition expense as an actual business deduction, but only if you are a licensed and active real estate agent. This will allow you to reduce your income directly and is, in most cases, a better tax impact.

What should you do? Prior to registering as a real estate agent with a brokerage, your tuition courses should be recorded as a tuition credit. After registering, your tuition expenses should be a deduction against income. For all the TREB/RECO/OREA/CREA dues, make sure you keep the invoices. Not only are they a deduction, they will also reduce the HST you pay to the CRA!

HST

Tracking the HST you incur on your real estate activities and expenses can add up to significant tax savings! As you may know, any HST you collect less any HST you spend has to be remitted to the CRA. Therefore, the more you spend in HST for business, the less you will remit to the CRA.

So make sure you keep great records, including all your receipts! We have a GREAT solution to help you with this — you can find out more about that here: Bookkeeping – The Mad Accountant

HST and Vehicles

HST on vehicles is a huge gap and a lost opportunity for real estate agents.

Unfortunately, the HST rules are not straightforward when vehicles are involved. Since the HST you spend on vehicles (if you paid any) is usually significant, it is important that you get it right! There are MANY ways to deal with vehicles and your business, much of it being determined by the amount of usage and the type of business. For example,

  • For Sole Proprietorships:
    • The CRA will allow you to claim all of the HST you pay on a vehicle purchase, if the vehicle is used 90% or more for business, AND
    • will disallow any claim to HST if the vehicle is used 10% or less for business.
    • If your usage is in between, there is a formula that must be used to arrive at the HST amount you are allowed to claim.
  • For Corporations:
    • Check back on July 22!

Don’t Miss Out!

We have seen many real estate agents miss out on these deductions — don’t let that be you! Book some time with me to make the right decisions with your taxes. Keep more of YOUR money in YOUR pocket!

And stay tuned! All of this is important, but we have some much more exciting news in two weeks. So if you are a real estate agent, are aspiring to be one, or know someone who is, this will be the show for you! Check back on July 22!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.