Intention is a plan you can paper
Capital versus business treatment turns on what you intended at purchase, so the cheapest tax planning available is evidence: a financing term that matches the story, a lease-up plan in writing, correspondence with your agent that says hold rather than list. The 365-day flipping rule sets a hard floor under quick sales; beyond it, a documented plan formed at purchase beats an argument invented at audit. We help you build that file the week you close, when it costs nothing.
One pattern we specifically plan around is the serial renovate-and-move-in. Living in each project does not make the profits tax-free: a repeating pattern reads as a business, the principal-residence exemption can be denied on it, and CRA's real estate program looks for exactly this fact set.
Sell or refinance: the BRRRR fork
Refinancing is the quietly powerful option because borrowing is not a disposition. A refinance releases capital with no tax today, while a sale crystallizes business income or a capital gain now. Interest follows the use of the money: refinance proceeds pushed into the next project are deductible against that project, while proceeds spent personally are not, whatever property secures the loan. We keep the tracing schedule as part of the plan, because deductibility is won or lost in the records.
| Sell | Refinance and hold | |
|---|---|---|
| Tax today | Business income or capital gain in the year of sale | None; borrowing is not a disposition |
| Cash released | Full equity, less selling costs and tax | A lender-set share of appraised value |
| Interest afterward | None | Deductible where proceeds fund income-earning use |
| Fits when | The margin is made and capital is needed elsewhere | The rent carries the debt and you want untaxed compounding |
Rate, timing and the year-end
Flip income arrives in lumps, and lumps are what planning smooths. A corporation paying roughly 12.2% on its first $500,000 of active income creates about 40 points of deferral against Ontario's top personal rate of 53.53%, but only if profits stay in and get reinvested. We time salary and dividends against project completions, set instalments so one big closing does not become interest owing, and choose a corporate year-end that does not land mid-selling-season. Tax Planning & Advisory revisits the plan every year, because a plan set once at incorporation goes stale by the third deal.
Two quieter levers sit beside the rate math. Salary paid out of flip profits creates RRSP room and CPP entitlement that dividends never will, which matters for an investor whose entire net worth is otherwise in property. And where a spouse or adult child genuinely works on projects, whether that is demolition days, staging or bookkeeping, reasonable wages for real work are deductible to the business and taxed in their lower hands, a form of income splitting that survives scrutiny because it is simply payroll.
If BRRRR holds accumulate inside the corporate group, watch the passive-income grind: once investment income, including net rents, passes $50,000 in a year, the federal small business limit shrinks by $5 for every additional dollar and disappears at $150,000.
Costs people forget to model
- Land transfer tax. Paid on every acquisition at marginal rates up to 2.5%, and roughly doubled inside Toronto by the municipal tax on top. It is not deductible when paid; it sits in project cost until the sale. For a frequent trader across the GTA, LTT quietly becomes one of the largest real costs and belongs in every offer model.
- CCA on the holds is a choice. Claiming 4% on a Class 1 building shelters rent today, cannot create or increase a rental loss, and is recaptured in full on sale. For a short planned hold, recapture usually cancels the benefit. Over a long hold, the deferral is real money.
- The clean-exit file. Every position needs its paper in the year it is taken: appraisal support at self-supply, tracing for refinance interest, the lease that shows a hold was genuine. Our decisions library shows how we frame calls like these.
Planning engagements are scoped in writing after a free 15-minute discovery call. Between projects, CPA Quick Support at $99 a month keeps a CPA on call for deal-by-deal questions without a full engagement.
Source: Ontario — Land transfer tax.
