Ever wonder if you can save big by deducting real estate commissions from your taxes? Let’s break it down simply.
When buying or selling property in the GTA—Milton, Mississauga, Burlington, Oakville, or Georgetown—real estate commissions can seem like an unavoidable sizeable expense. But the question is: can you deduct real estate commission from your taxes?
Understanding Real Estate Commissions and Tax Deductions
Real estate commission is the fee paid to the agent or broker for their services in facilitating the property transaction. Typically, this fee is between 3% to 6% of the sale price.
The Canada Revenue Agency (CRA) has specific rules about what real estate transaction costs are deductible.
For Home Buyers: Can You Deduct Commissions?
Unfortunately, if you are buying a residential property for personal use, the real estate commissions you pay are NOT tax-deductible. The CRA considers these costs part of the property’s purchase price, which affects your property’s adjusted cost base (ACB) but cannot be deducted as an immediate expense.
For Home Sellers: What Can You Deduct?
If you sell your principal residence, the commission you paid is considered a selling expense that reduces your capital gain (or increases a capital loss). However, principal residences are generally exempt from capital gains tax, so while you can’t directly deduct the commission, it helps reduce any taxable gain if applicable.
For Investment Properties and Business Use
If you own a rental or investment property, real estate commissions related to selling the property can be deducted against capital gains on that sale. For rental properties, commissions paid when buying or selling can be added to the cost base or deducted as expenses, depending on the situation.
When You Are Self-Employed or in Real Estate Business
If you are a real estate professional or self-employed in real estate, commissions paid to others (or commissions you pay on your sales) may be fully deductible as business expenses, allowing tax benefits.
Key Takeaways
- Real estate commissions on personal home purchases are NOT deductible immediately.
- Commissions reduce capital gains when selling, mainly important for investment properties.
- For rental or business properties, commissions can often be deducted or added to the property’s cost base.
- Self-employed real estate professionals can deduct commissions as business expenses.
Boost Your Tax Strategy with Local Real Estate Expertise
Navigating real estate commissions and tax deductions isn’t straightforward. Knowing your rights and the intricacies can save you thousands. Whether buying or selling in Milton, Mississauga, Burlington, Oakville, or Georgetown, a skilled real estate expert can guide you through these financial aspects with confidence.
Don’t leave money on the table. Understand how real estate commissions affect your taxes to make smarter investments and bigger savings.
For more expert advice tailored to the GTA market, contact Tony Sousa, trusted local realtor.
Email: tony@sousasells.ca
Phone: 416-477-2620
Website: https://www.sousasells.ca
