9 Advanced Tax Strategies for Ontario Real Estate Agents with a PREC

If you’re a successful real estate agent in Ontario, incorporating through a PREC is a smart move. It opens the door to tax deferral, limited income splitting, and better wealth-building tools than what you can do as a sole proprietor.

But here’s the problem: most agents stop at the basics. They set up the corporation, pull out dividends when they need cash, and let profits sit in the PREC doing nothing. The truly strategic agents — those thinking long-term — are doing a whole lot more.

This post outlines 9 advanced (yet underused) tax strategies that real estate professionals should consider once their PREC is generating serious profits.

1. Use a Holding Company to Invest Without Tripping Tax Rules

A holding company (HoldCo) above your PREC allows you to:

• Move profits tax-free via intercorporate dividends
• Invest retained earnings in real estate, stocks, or funds
• Isolate risk and improve asset protection

Why it matters: Holding investments in your PREC can create tax headaches (like passive income grinding down your small business rate). A HoldCo avoids that — and makes estate planning cleaner.

2. Structure Salary and Dividends Intentionally

Salary creates RRSP room and CPP contributions. Dividends are more flexible and can lower overall tax.

Advanced approach:

• Pay a base salary to create RRSP room
• Take the rest as dividends to avoid payroll tax
• Invest surplus funds inside the corporation for long-term deferral

Bonus: Timing dividends around lower-income years (or after big personal purchases) can reduce tax burden.

3. Use an Individual Pension Plan (IPP) for Bigger Retirement Contributions

If you’re consistently earning $100K+ through your PREC, an IPP might outperform your RRSP:

• Contributions are higher — especially as you age
• Your PREC gets the tax deduction
• Assets are protected from creditors
• It creates a predictable, pension-style retirement stream

Want even more flexibility? Add an RCA (Retirement Compensation Arrangement) alongside the IPP.

4. Income Splitting with a Prescribed Rate Loan

You can’t just pay your spouse or kids dividends. But you can lend money from your PREC to a family trust at the CRA’s prescribed rate (currently 5%).

That trust then invests in real estate, ETFs, or a business — and allocates income to lower-income adult family members.

Result: Significant long-term tax savings while keeping control of the capital.

5. Corporate-Owned Life Insurance = Tax-Free Wealth Transfer

Permanent life insurance owned inside your PREC can:

• Grow tax-sheltered cash value
• Provide a tax-free death benefit
• Generate Capital Dividend Account (CDA) credits to extract funds from your PREC tax-free upon death

It’s especially powerful for agents building wealth in their corporation they won’t need during their lifetime.

6. Real Estate Investing Through Your Corp

Instead of pulling cash out of your PREC and buying real estate personally, consider:

• Using your retained earnings to purchase rental properties
• Owning office space through your HoldCo or PREC and leasing it back

Pro strategy: Own the property in a family member–owned corp or trust to enable future income splitting.

7. Purify the PREC to Keep Future Doors Open

Most PRECs won’t qualify for the $1M Lifetime Capital Gains Exemption (LCGE) — but things can change. If you:

• Add a new qualifying business (e.g., staging services, coaching, RE tech)
• Transfer that into a separate active business corporation

You can set it up to access the LCGE down the line. Even if you never sell, purification is good practice to avoid problems with CRA and improve planning flexibility.

8. Make Your PREC Audit-Proof

CRA audit risk is rising — especially for incorporated professionals. Realtors often deduct big-ticket items like vehicles, travel, and meals. That’s fine — if you’re properly structured.

Here’s how to protect yourself:

• Separate accounts: Don’t mix personal and business transactions
• Keep corporate records: Board minutes (even if it’s just you), tax filings, and shareholder decisions
• Document expenses: Store invoices, receipts, and notes on why each expense was business-related
• Use business branding: Operate your PREC like a real business. Use professional email addresses, branded invoices, a business website, and clear digital presence.

The goal is to show CRA that your PREC is a legitimate business, not a shell.

9. Start Succession and Exit Planning Early

Most real estate agents don’t think about exit plans — but you should. You might not “sell” your book like in other industries, but:

• You can freeze your PREC’s value now and transfer future growth to a family trust
• You can roll assets into another structure for retirement income
• You can create clean transitions for heirs or future business partners

Even if you never formally retire, planning ahead makes the path smoother.

Final Thoughts:

Your PREC is more than just a tax deferral tool. It’s the core of your financial engine. With proper structure, discipline, and planning, you can:

• Minimize your tax bill
• Protect your assets
• Build a retirement strategy that actually works

Want to explore how these strategies apply to your situation?
We help high-performing realtors across Ontario unlock the full potential of their PREC with personalized planning, creative structuring, and tax-smart investment strategies.

Book a strategy session today and let’s build your long-term plan.