Real estate investors know that paying taxes on rental income can be a heavy hit to profits. With rental income classified as passive in Canada, it faces one of the highest corporate tax rates—up to 50%.
The good news? There’s a strategy some investors use to lower that tax bill substantially. It involves creating a second corporation that provides management services to your rental properties, allowing for a lower active business income tax rate.
Here’s a step-by-step guide to how this structure works and how it could cut taxes on your rental income.
