PREC pension - discovering tax deductions for BC REALTORS®
Realtors who use a Personal Real Estate Corporation (PREC) have a new option for retirement savings: a pension plan.
If you’re under the age of 71 and operating as a PREC, and you take some of your compensation from that PREC in the form of T4 income, you’re eligible to set up a pension plan.
The pension plan comes with several tax deductions for your PREC that aren’t available otherwise. This focus is on one of seven new tax deductions made possible by using a pension plan: the purchase of Past Service.
How it works
Contributor: Pension lawyer and INTEGRIS CEO Jean Pierre Laporte, BA, MA, LLB, (Jp.laporte@integris-mgt.com)
If a PREC paid T4 income to the realtor as its employee in the past (going back to the date of incorporation), that qualifies as what’s known as Past Service.
Once the pension plan is set up, we will calculate the contribution that the PREC can make to purchase this Past Service.
The amount contributed, which could be as high as $500,000, becomes a brand-new corporate expense for the PREC.
Because the amount contributed goes into a pension plan, it does not create any personal tax issues, since it is not considered an employer benefit.
We’ll explore other tax deductions you might not know were available in the weeks to come.