{"id":17050,"date":"2019-11-29T01:00:00","date_gmt":"2019-11-29T06:00:00","guid":{"rendered":"https:\/\/www.zoocasa.com\/blog\/?p=17050"},"modified":"2019-11-27T13:43:43","modified_gmt":"2019-11-27T18:43:43","slug":"should-you-incorporate-your-rental-properties","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/should-you-incorporate-your-rental-properties\/","title":{"rendered":"Should You Incorporate Your Rental Properties?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><br><strong>By: Loans Canada<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investing in real estate is one of the best ways to build long-term wealth, and there are several ways to take advantage of this opportunity. From holding and renting to fixing and flipping, having real estate in your investment portfolio is a great way to earn a great living, save up for retirement, or both.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That said, if you currently have a couple of rental properties on the books, you may have wondered whether or not you should incorporate them\u00a0(learn about how the\u00a0<a href=\"https:\/\/loanscanada.ca\/business\/how-to-incorporate-a-business-in-canada\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"incorporation process works (opens in a new tab)\">incorporation process works<\/a>). To finalize that decision, it&#8217;s important that you speak with your accountant or tax specialist. But in the meantime, here are some factors that you may want to consider when it comes to incorporating your rental investment properties.\u00a0<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Advantages of Incorporating Your Rental Property<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Let&#8217;s go over some of the reasons why incorporating your rental properties might be beneficial for you.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Limited liability<g class=\"gr_ gr_6 gr-alert gr_gramm gr_inline_cards gr_disable_anim_appear Style replaceWithoutSep\" id=\"6\" data-gr-id=\"6\">.<\/g><\/strong> <g class=\"gr_ gr_6 gr-alert gr_gramm gr_inline_cards gr_disable_anim_appear Style replaceWithoutSep\" id=\"6\" data-gr-id=\"6\">If<\/g> you&#8217;re ever in the unfortunate situation where you&#8217;re the target of litigation, being incorporated will protect your personal assets if you&#8217;re ever sued. In this case, your personal assets &#8211; such as your home or car &#8211; will be off-limits. Instead, only the assets of your business could be subject to damages collected by the plaintiff.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Anonymity<\/strong>. Some owners don&#8217;t like the idea of their tenants knowing everything about them, including their full name and where they live. Instead, with incorporation, tenants will be writing their checks to your business name rather than your personal name, giving you some level of anonymity.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Tax benefits.&nbsp;<\/strong>You may be able to save on taxes come taxseason. When you incorporate your rental properties, you&#8217;ll essentially be separating your rental and personal incomes. In turn, this can reduce your individual tax bracket while allowing you to become eligible for business tax deductions, such as business expenses.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>More flexibility when retiring.<\/strong> Incorporating your properties and real estate investing business could give you more flexibility as far as when income is taken as dividends is concerned. You can take advantage of recovering refundable taxes and potentially avoid having to pay personal taxes or be bumped up into the next tax bracket level.\u00a0<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Disadvantages of Incorporating Your Rental Property<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">While there are certainly benefits to incorporating your investment properties, there are also a few drawbacks to consider.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Cost of incorporation<\/strong>. Incorporating a business does not come without its costs, which is something you need to do some number crunching on. Setting up the company and reporting it can be expensive, which can run you as much as a few thousand dollars, depending on the complexity of your corporation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Potential tax consequences<\/strong>. Transferring your properties from yourself as an individual taxpayer to a holding company might come with tax consequences, aside from income taxes. If the province you live in has a land transfer tax, you will likely have to pay the land transfer taxes when the properties are transferred to the holding company. In Ontario, for instance, land transfer taxes exist, so this is something to be mindful of if your properties are located here.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Tax Implications to be Aware Of<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">As already mentioned, incorporating your rental properties can benefit you when it comes to separating your personal income versus that of your real estate investment business. The transfer of real property held personally might allow you to qualify for a Section 85 tax-free rollover, which allows you to transfer real estate to a corporation without suffering any immediate tax ramifications.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, your ability to take advantage of this rollover only applies if the CRA considers your properties to be rental investment properties instead of inventory. You&#8217;ll want to make sure that this is how the CRA views your properties, or else you won&#8217;t qualify for a tax-free rollover, which could then trigger unwanted tax consequences.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You&#8217;ll also want to understand the tax rates in your particular province, as there are different rates in different provinces across Canada. Depending on which province you live in, it may be more beneficial for you, from a tax standpoint, to keep your rental property personal rather than incorporate it. Recent changes in tax regulations may also make it less advantageous to own investments inside a corporation, depending on the province that you live in.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Final Thoughts<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Before you decide whether or not to incorporate your real estate rental business, you&#8217;ll want to gather as much information as possible and weigh the pros and cons first. Be sure to speak with a seasoned real estate tax expert&nbsp;and realestate lawyer who can fill you in on all the ins and outs of incorporating your investment properties and help you determine whether or not incorporating make financial sense for you.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By: Loans Canada Investing in real estate is one of the best ways to build long-term wealth, and there are several ways to take advantage of this opportunity. From holding and renting to fixing and flipping, having real estate in your investment portfolio is a great way to earn a great living, save up for [&hellip;]<\/p>\n","protected":false},"author":81,"featured_media":17052,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":[],"jnews_primary_category":[],"footnotes":""},"categories":[487,560],"tags":[],"class_list":["post-17050","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-guest-posts","category-home-investment"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Should You Incorporate Your Rental Properties? | Zoocasa<\/title>\n<meta name=\"description\" content=\"By: Loans Canada Investing in real estate is one of the best ways to build long-term wealth, and there are several ways to take advantage of this\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.zoocasa.com\/blog\/should-you-incorporate-your-rental-properties\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Should You Incorporate Your Rental Properties? 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