A big commission cheque feels great, until tax season shows how much of it belongs to the CRA. That is why so many Ontario agents ask whether a Personal Real Estate Corporation (PREC) lets them keep more of what they earn. The honest answer: a PREC can defer personal tax on money you do not need to spend, but only if you meet Ontario's real estate rules and the numbers work for your income.
This guide walks through the 2026 tax rates, the TRESA conditions, the setup steps and the costs, with a worked example so you can see what actually changes. If you want your own numbers run before you decide, Good Accounting connects Ontario realtors with listed corporate tax accountants for real estate agents who handle PREC planning, incorporation and annual filings.
Quick answer: what is a PREC?
A PREC is an Ontario corporation that lets a RECO-registered salesperson or broker have commissions paid to the corporation instead of to them personally. It is a tax-deferral tool, not a licence and not a liability shield.
PREC at a glance
| PREC at a glance | Detail |
|---|---|
| Governing rules | TRESA and O. Reg. 536/20 (PRECs allowed since October 1, 2020) |
| Small business rate | 11.2% combined from July 1, 2026, on the first $500,000 of qualifying income |
| Ownership | One registered agent holds all voting shares |
| RECO registration | Exempt, but you must notify RECO before the PREC is paid |
| How many | One PREC per agent, working through one brokerage |
| Main benefit | Deferring personal tax on income you leave inside |
| Liability | Not shielded: you remain responsible for your conduct |
What a PREC can and cannot do
| What you want to do | Allowed? | What to know |
|---|---|---|
| Have your commission paid to the corporation | Yes | Only your employing brokerage can pay it |
| Pay yourself salary or dividends | Yes | Salary triggers payroll services and CPP; dividends do not |
| Pay family members who work in the business | Yes | A reasonable wage for real work, backed by time records |
| Keep and invest surplus cash | Yes | Investment income can shrink the small business limit |
| Work alongside your team | Yes | Each agent needs their own PREC, and team contracts may need updating |
| Trade in real estate or act as a brokerage | No | The PREC only provides your services to your brokerage |
| Hold client money or property | No | Trust money stays with the brokerage |
| Share one PREC with another agent | No | One controlling registrant; family may hold non-voting shares only |
| Advertise the corporation | No | Its name stays out of your advertising |
| Limit your personal responsibility | No | You stay answerable to RECO for your regulated activity |
- You stay registered with RECO and responsible for your regulated activity.
- The PREC is a separate legal person that can be sued, so ask an insurance broker whether it needs its own cover.
- If you change brokerages, you need a new three-party agreement and a new notice to RECO.
PREC tax in 2026: rates, deferral and the real trade-off
The headline rate is the draw. Qualifying active business income up to $500,000 is taxed at a much lower rate inside a PREC than it would be in your hands.
| Qualifying income (first $500,000) | Federal | Ontario | Combined |
|---|---|---|---|
| Until June 30, 2026 | 9% | 3.2% | 12.2% |
| From July 1, 2026 | 9% | 2.2% | 11.2% |
- Straddling years: Ontario prorates by days. A December 31, 2026 year-end blends to about 2.7% Ontario and 11.7% combined. The full 11.2% applies from 2027.
- Above $500,000, or non-qualifying income: taxed at the 26.5% combined general rate.
- Passive income: once investment income passes $50,000 a year, the federal small business limit shrinks by $5 for every $1 over that, reaching zero at $150,000.
- Taking money out from 2027: Ontario's non-eligible dividend tax credit drops on January 1, 2027, lifting the top rate on those dividends from 47.74% to about 48.89%.
The catch: personal services business (PSB) risk
The low rate only applies if the PREC qualifies for the small business deduction. If the CRA decides you would reasonably be an employee of your brokerage, the PREC could be a personal services business, which loses the small business deduction and faces extra federal tax. Most agents are independent contractors, but it depends on how your contract and working arrangement actually look, so have it reviewed.
A simple example: deferred, not erased
Take an agent with $350,000 of net income who needs $200,000 to live on. What happens to the extra $150,000, using 2026 combined rates?
| The extra $150,000 | Total tax | Cash after tax |
|---|---|---|
| A. Earned personally | $77,813 | $72,187 |
| B. Left in the PREC | $16,800 | $133,200 |
| C. Left in, then paid out as a dividend | $80,390 | $69,610 |
- B versus A: leaving the money inside defers about $61,000 of tax, and that money can stay invested.
- C versus A: paying it all out straight away ends up about $2,600 worse than earning it personally.
- Your takeaway: the value is in the timing, so it depends on how much you can genuinely leave invested.
This simplified example ignores CPP, RRSP room and other deductions. For figures based on your own income, talk to accountants for real estate agents, or compare it with staying unincorporated through self-employed tax filing.
Is a PREC right for you?
No RECO rule sets an income threshold, so ask three questions: How much do you earn after expenses? How much do you need to withdraw each year? Will the deferral outweigh incorporation, bookkeeping and filing costs?
A PREC tends to fit when you
- earn well above what your household spends
- plan to invest or build reserves inside the corporation
- want control over when personal tax is triggered
- have family who genuinely work in the business
It may not pay off yet when you
- withdraw nearly everything you earn
- have modest or unpredictable income
- are counting on income splitting that TOSI would block
- would rather avoid separate books and extra filings
Not ready? Our self-employed tax filing and personal tax filing professionals can help you plan in the meantime.
TRESA rules: who qualifies for a PREC?
Under the Trust in Real Estate Services Act, 2002 (TRESA) and Ontario Regulation 536/20, a PREC must meet these conditions:
- It is incorporated or continued under Ontario's Business Corporations Act.
- You, as a registered salesperson or broker, own all the voting shares and are the sole director, officer and president.
- It provides only your services to your employing brokerage and is paid only by that brokerage.
- You, the PREC and your brokerage sign a written agreement, and the brokerage confirms the conditions are met before paying anything.
| Who | What they can hold |
|---|---|
| You, the controlling registrant | All voting shares |
| Spouse, child or parent | Non-voting shares only |
| Trust for a child under 18 | Non-voting shares only |
| Another agent (not family) | Nothing |
| A holding company | Possible if it meets the same criteria; get legal advice |
Your brokerage is not obliged to agree to a PREC, so speak with your broker of record before you incorporate.
Can your spouse or family receive PREC dividends?
Family can hold non-voting shares, but that does not automatically save tax. Under the federal tax on split income (TOSI) rules, dividends to family members are usually taxed at the top rate unless an exception applies:
- Excluded business: the family member works in the business about 20 hours a week.
- Reasonable return: for adults 25 or older, judged on work done, capital contributed and risk taken.
- Excluded shares: these look unavailable to a PREC, because its income is all from services.
Salary is not split income, so a family member who does real work can be paid a reasonable wage through payroll services. Keep time records and written role descriptions for anyone you rely on.
Moving your current business into a PREC
Timing matters if you already have deals in motion:
- Deals that closed before incorporation are generally paid to you personally.
- Deals closing after incorporation and after the new brokerage agreement are generally paid to the PREC, but the CRA may question the full amount if much of the work happened before the PREC existed.
- Work in progress can be sold to the PREC, and a joint CRA election (Form T2057) sets the price between cost and fair market value.
This is where documentation and dates decide the outcome, so plan it with an accountant before the first commission flows to the corporation.
How to set up a PREC in Ontario
Follow these steps in order. The sequence matters, because the brokerage agreement and the RECO notice must be in place before the PREC is paid.
- Confirm you are eligible and get your brokerage on board. You must be a RECO-registered salesperson or broker employed by a brokerage (independent contractors count). Ask your broker of record in writing whether the brokerage will sign a PREC agreement, because it is not obliged to.
- Check the tax case first. Ask a corporate tax accountant to model your income, withdrawals and deferral, and to review whether your contract could make the PREC a personal services business.
- Design the share structure. You hold all voting shares and act as sole director, officer and president. Decide whether a spouse, child, parent or a trust for a minor child will hold non-voting shares, and have an advisor check the TOSI impact before any shares are issued. Do not sign anything that transfers or limits your powers as sole director.
- Choose the name. It must not suggest the PREC trades in real estate, and it must stay out of your advertising. A named corporation needs a NUANS name search report; a numbered company does not.
- Incorporate under Ontario's Business Corporations Act. File the articles of incorporation through the Ontario Business Registry (government fee $300), then complete the minute book, share issuances and director and officer appointments. Our business incorporation and registration professionals can handle this.
- Sign the three-party agreement. You, the PREC and the brokerage sign a written agreement that meets TRESA. The PREC agrees not to hinder you or the broker of record in meeting legal duties, and to give the help needed to confirm the conditions are met.
- Notify RECO before the first payment. Email the PREC's legal name and address for service to [email protected] and keep a copy. The brokerage must be satisfied the PREC qualifies before it pays any commission.
- Register with the CRA and open banking. Get a business number with a corporate income tax account, add GST/HST and payroll accounts as needed, and open a separate corporate bank account.
- Arrange insurance. The PREC is a separate legal person that can be sued, so ask your insurance broker whether it needs its own cover alongside yours.
- Redirect commissions and handle deals in progress. Give the brokerage the PREC's banking and tax details. Agree in writing which deals pay to you and which to the PREC, and discuss any work-in-progress sale and election with your accountant.
- Set up your systems and calendar. Start bookkeeping services on cloud accounting software, decide how you will pay yourself, and diarize the T2, GST/HST, Ontario annual return and RECO's five-day change notice.
What does a PREC cost to set up?
The Ontario government filing fee to incorporate is $300, and a named corporation also needs a NUANS name search report. Legal drafting, share-structure advice, tax modelling and ongoing bookkeeping and filing are extra and vary by provider, so ask for a written quote rather than assuming a headline price applies to you.
Ongoing PREC obligations
| Obligation | What to know |
|---|---|
| Bookkeeping | Keep commission deposits, brokerage splits, referral fees, marketing costs and owner withdrawals clearly separate from personal money. See why proper bookkeeping matters. |
| GST/HST | Commissions are taxable supplies. Once taxable sales pass $30,000 over four consecutive calendar quarters, the PREC must register. See GST/HST filing and the HST/GST myths article. |
| Salary and dividends | Salary brings payroll and CPP obligations (see the CPP contribution rate for 2027) and creates RRSP room. Dividends do not. |
| T2 return | Due six months after year-end even if no tax is owing. The tax balance is normally due in two months, or three if the corporation qualifies. See corporate tax filing. |
| Ontario annual return | Filed each year to confirm the corporation is active and update its details. |
| RECO | Tell RECO in writing within five days of any change to the information you supplied. |
Common PREC mistakes to avoid
- Treating the RECO notice as a separate licence or registration.
- Incorporating before your brokerage has agreed.
- Assuming all PREC income gets the small business rate.
- Quoting tax savings without counting future tax on withdrawals.
- Mixing personal and corporate money, or missing GST/HST, payroll or T2 deadlines.
Find a PREC accountant through Good Accounting
Good Accounting is a marketing platform that connects you with listed accounting professionals. We are not an accounting firm, so the professional you engage provides the work, and fees and scope depend on them. Start with our page for accountants for real estate agents, browse all accounting services, or find local help in Toronto, Mississauga, Brampton or other Ontario cities.
PREC FAQ
Do I have to register my PREC with RECO?
No separate registration is required for a qualifying PREC. You must notify RECO before it receives commission, and you stay personally registered.
Can two agents own one PREC?
No. A PREC has one controlling registrant who owns all the voting shares and is the sole director and officer.
Is the 2026 rate always 11.2%?
No. It applies to qualifying income earned after June 30, 2026, up to the $500,000 limit. Year-ends that straddle the date blend the rates.
Can a buyer or seller pay my PREC directly?
No. Commission flows through your brokerage, because the PREC is not a registered brokerage.
What happens if I change brokerages?
You need a new written agreement with the new brokerage and a new notice to RECO. The PREC itself stays in place.
Do I need to register for GST/HST?
Usually yes, once taxable sales pass $30,000 over four consecutive calendar quarters.
Sources
- Real Estate Council of Ontario (RECO): Personal Real Estate Corporations and PREC checklist
- Government of Ontario: TRESA, O. Reg. 536/20, Ontario Business Registry and the 2026 Ontario Budget
- Canada Revenue Agency: corporation tax rates, personal services business, tax on split income, GST/HST registration and T2 filing guidance
- Ontario Real Estate Association (OREA): PREC FAQ
Disclaimer: This article is general information, not accounting, tax, legal or financial advice. Rules and rates change, so please consult a licensed accountant in Brampton or the GTA before acting. Good Accounting is a marketing platform that lists professionals. It is not an accounting firm or a law firm.