Industry tax guides
Real Estate Agent Taxes in Canada: Commissions, GST and Expenses
$30,000of taxable commissions over four calendar quarters is the point at which a self employed agent must register for GST/HST and start charging it.
Sources checked October 20263 min read
Self employed or employed
Most agents act as independent contractors through a brokerage and report their commissions and expenses as self employment income on Form T2125, paying both the employee and the employer share of CPP contributions. An agent who is an employee of the brokerage and pays their own expenses claims them as employment expenses on Form T777, with Form T2200 completed by the brokerage; annual licence fees are one of the expenses commission employees can deduct.
Self employed commission agents are one of the few groups allowed to report income on the cash method rather than the accrual method, although GST/HST still follows accrual timing.
Key points
- Most agents are self employed and report commissions on Form T2125
- Self employed commission agents may use the cash method for income tax
- Commissions are taxable supplies, so GST/HST registration is required once they pass $30,000
- Uneven income often means instalments, required once tax owing passes $3,000
GST/HST on commissions
A commission is payment for a taxable service. A self employed agent stops being a small supplier, and must register for GST/HST, once taxable revenue passes $30,000 in a single calendar quarter or over four consecutive quarters. Registering earlier is allowed and lets the agent claim input tax credits on business expenses from the start. Once registered, GST/HST is charged on every commission and remitted on the agent's own return.
Expenses and uneven income
Deductible expenses include board and association fees, licence fees, advertising and marketing, staging and photography paid by the agent, a business use share of a vehicle supported by a log of business kilometres, and a home office that meets the CRA's conditions. Meals and entertainment with clients are limited to 50%. Commission income is uneven, so a good year can leave a large balance owing in April; once net tax owing passes $3,000 in the current year and either of the two previous years, the CRA expects quarterly instalments.
Whether to incorporate through a personal real estate corporation depends on provincial rules and on how much income can stay in the corporation. It does not make any expense deductible that was not already.
Quick answers
Do real estate agents have to charge GST?
Yes, once taxable commissions pass $30,000 in a calendar quarter or over four consecutive quarters. Agents below that can register voluntarily to recover GST/HST on their expenses.
Can a realtor deduct their car?
The business use share of vehicle costs is deductible, measured by a log of business and personal kilometres. Driving between home and a regular place of business is personal.
Can real estate agents use the cash method?
Yes. Self employed commission agents may report income on the cash method for income tax, though GST/HST is still reported when invoiced or paid, whichever comes first.
Related pages
Official sources
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Important. This article provides general educational information, not legal or tax advice for a specific business. Rules, administrative policies, rates and deadlines can change. Confirm your facts and current obligations with the responsible government agency and a qualified adviser.