Are you thinking of real estate investing? Is it better to buy a property as an individual or do it through a corporation?
Learn more about real estate investing and its tax consequences in this video.
If you prefer reading, you can find the transcription below the video.
real estate investing
Good afternoon, everyone. It’s Irfanali with RMI Professional Corporation once again. I hope everyone’s had a fantastic summer.
As we hit September I’m sure those with little ones are happy it’s back to school time.
Today, I wanted to talk about a topic that I’ve been hearing lots about lately and that’s real estate investing. I get these common questions all the time. Should I buy my property personally? Should I buy it through a corporation? What’s the right structure?
what to consider before investing in real estate
There are a few things I always consider when deciding this. The first one is – is the income gonna be active versus passive. This is really important, especially when looking at a corporate structure because your tax rates will be different for the type of activity.
Some activities that are considered active income would be, for example, if you’re actually doing a full build. If you’re renovating and doing a full renovation on a house. Or if you are doing flips for example. Those all would be considered active. Another really key is actually if you’re doing short-term rentals. So, putting the property on Airbnb for example is still considered active income.
Passive income on the other hand is more long-term rentals or medium-term rentals. So, with 1 month or longer, and the ones you’re treating through a corporation, your tax rates are actually a little bit higher. So, it is very important to consider the right structure when moving forward with that.
What about GST ?
The next consideration that becomes really important is if the activity you’re doing in real estate is actually taxable from a GST standpoint.
So, for things like short-term rentals you actually need to be charging GST. There are new rules that have been passed where operators are actually gonna take GST if you don’t provide your GST numbers to them.
So, for example, Airbnb would charge your customer GST if you’re not actually GST registered. So that’s a very important factor as well. If you’re doing a build, for example, there are some very complex GST issues that can come into play because you have to do some self-assessments after the property’s built. Again, very important to consider. Is the activity that you’re doing actually taxable from a GST standpoint? And what gets taxed? Have those considerations in mind as well.
Should you Invest in real estate personally or through a corporation?
And then the third question is – should you buy your property personally or should you buy it through a corporation?
Now, with this one you have to look at the overall picture. What are you doing with real estate investing? How many properties do you want to buy? What’s the nature of the activity?
There are some very good corporate structures that can be set up in order to actually achieve long-term goals and minimize your taxes when investing in real estate.
Talk to Real estate tax accountants in calgary
Once again, it’s Irfanali with RMI Professional Corporation and if you want any other information, please subscribe to our YouTube channel. Thank you and have a great week.