INCORPORATION OF RENTAL PROPERTIES
Hi, After how many properties should we incorporate in Canada? Are you allowed to claim CCA for Tesla (Zero emission) that is used to manage residential properties in your personal name?
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That’s a hard question to answer. It really depends on your situation and should also consult an accountant as well.
If you only own a couple rentals, it probably isn’t worth it. However if you plan to scale and build, it can make sense to a lot earlier (I would also consider timeline to building your portfolio).
Keep in mind that rental income inside of a corporation is considered passive income and is taxed at the highest possible tax rate (52% I believe) so there are strategies with multiple corps to help reduce this somewhat.
Not to mention that you can expect to pay $1500-3000/year for corporate tax filings and $500 or so for legal upkeep…and worst of all is that everything in and out of the corporate accounts has to be tracked and accounted for.
Transferring properties in certain provinces can also trigger land transfer taxes etc (BC).
Being incorporated does have some benefits - mitigation or liability.
Long story short, there is a lot to consider and definitely consult with an accountant, lawyer and a seasoned investor. For myself it was year 7 and owning about 10 properties before it made sense for my scenario, and the main reason was to reduce taxes with flips and push funds into more buy and hold acquisitions.
Hopefully that helps a bit!