Why real estate agents get instalment notices
Salaried Canadians have income tax, CPP, and EI withheld from each paycheque by their employer, who remits those amounts to the CRA on the employee's behalf throughout the year. By the time the T1 personal income tax return is filed in April, most or all of the year's tax obligation has already been paid at source.
A self-employed real estate agent has no source deduction. Commission cheques and direct deposits arrive in full — gross of federal income tax, gross of provincial income tax, gross of CPP, and (where the agent is registered) gross of GST/HST. The full year's tax obligation is calculated only when the T1 is filed and lands on the return as a single balance owing.
Once that balance owing crosses a published threshold, CRA begins requiring the agent to prepay the next year's tax in quarterly instalments rather than waiting for the following April[2]. The instalment regime is the CRA's mechanism for matching the cash-flow pattern of source deduction onto self-employed income — collecting tax as the income is earned rather than once a year afterwards.
Agents who experience a strong commission year are the most common recipients of a first instalment reminder. The notice typically arrives by mail (or in CRA My Account) in February covering the March 15 and June 15 instalments, and again in August covering the September 15 and December 15 instalments[2].
The threshold: when instalments are required
CRA's published rule for individual taxpayers is straightforward: instalments are required when net tax owing is more than $3,000 in the current year and in either of the two preceding years[2]. For residents of Quebec, the federal threshold is $1,800, because Quebec residents pay federal and provincial income tax separately and the federal portion is correspondingly smaller[2].
Three details on the threshold mechanics:
- "Net tax owing" is the figure on the T1 return after credits and prior instalments are applied — not gross tax[2].
- Both conditions are required. A single high-income year followed by a low one may not trigger the requirement; CRA looks at a two-year window[2].
- CPP contributions on self-employment earnings count toward the net tax owing figure[2]. An agent with modest income tax but a substantial self-employed CPP contribution may cross the threshold from CPP alone.
When CRA determines instalments are required, the taxpayer receives an instalment reminder showing the suggested amount under the no-calculation method (described below). The reminder itself is not a bill — it is a notice that the quarterly obligation has been activated[2].
The three calculation methods
CRA publishes three methods for calculating each quarterly instalment payment[3]. A taxpayer may choose any of the three for any given year — the choice is not locked in advance, and switching methods between years is permitted[3].
1. No-calculation option
The no-calculation option is the default. CRA computes the quarterly amount and prints it directly on the instalment reminder. The figure is based on the most recent two years of assessed returns: the March 15 and June 15 instalments are each one-quarter of the second-most-recent year's net tax owing, and the September 15 and December 15 instalments are calculated to bring the year's total instalments to the most-recent year's net tax owing[3].
Following the no-calculation option exactly — paying each amount on or before its due date — eliminates instalment interest exposure for that year, regardless of what the actual current-year tax turns out to be[3][6].
2. Prior-year option
The prior-year option pays one quarter of the previous year's net tax owing on each of the four due dates[3]. This option produces a lower figure than the no-calculation option when income two years ago was higher than income last year — the no-calculation method is anchored to the older figure on the first two payments, while the prior-year method uses only the most recent assessed year.
Following the prior-year option exactly also eliminates instalment interest exposure, even if current-year income grows[3].
3. Current-year option
The current-year option pays one quarter of the taxpayer's own estimate of the current year's net tax owing[3]. This option produces the lowest figure when income is expected to drop materially — for example, when an agent moves to part-time, takes parental leave, or transitions to a salaried role mid-year.
The trade-off is interest risk. If the current-year estimate turns out to be low and actual tax owing is higher, CRA charges instalment interest on the underpayment from the original due date forward[6]. Following the current-year option exactly eliminates instalment interest only if the estimate matches or exceeds actual current-year tax.
How CRA charges interest across the three methods
CRA's published rule is that instalment interest is calculated on whichever of the three methods produces the lowest required payment for the year[6]. A taxpayer who chooses the no-calculation option and pays it correctly, but whose current-year option would have been even lower, is not penalised — interest is assessed against the floor, not the chosen method[6].
The four due dates
The four CRA-published instalment due dates for personal income tax instalments are[4]:
- March 15
- June 15
- September 15
- December 15
When a due date falls on a Saturday, Sunday, or public holiday, CRA treats payment received on the next business day as on time[4].
Farmers and fishers as defined under the Income Tax Act follow a different schedule — a single annual instalment due December 31[4] — but this schedule does not apply to real estate agents, whose self-employed income is business income rather than farming or fishing income.
The full 2026 calendar — quarterly instalment dates alongside the T1 self-employed filing deadline (June 15, with balance owing due April 30), the GST/HST return schedule, the T4A deadline, and the RRSP contribution deadline — is laid out in the Canadian real estate agent tax deadline calendar[9].
How to make the payment
CRA accepts instalment payments through several published channels[5]. All four route to the same taxpayer account; the choice between them is administrative.
- CRA My Account — the secure online portal for individuals. Instalment payments may be made directly from a Canadian chequing account using My Payment, or by setting up pre-authorized debit (PAD) for one or more scheduled instalment dates[5].
- Online banking through a Canadian financial institution — most major Canadian banks list "CRA (revenue) — tax instalment" (or a similarly worded payee) as a bill-payment option. The taxpayer's social insurance number is the account number[5].
- Pre-authorized debit (PAD) — set up either through My Account or by submitting Form RC366. PAD can be arranged for a single instalment or for the full schedule in advance[5].
- In person at a Canadian financial institution — using a personalized remittance voucher (Form INNS3) which CRA mails alongside instalment reminders, or which can be ordered through My Account or by phone[5].
CRA also accepts payment by credit card and select third-party payment services, though these intermediaries charge a service fee that is not refunded by CRA[5].
Whichever channel is used, CRA records the date the payment is received — not the date it was initiated. Online banking bill payments and PAD typically take 1–3 business days to post, so the initiation date and the credited date are not the same[5].
Get the Canadian Realtor Tax Cheat Sheet
Every 2025 bracket, CPP rate, GST/HST threshold, and instalment due date on one printable page — CRA-cited. We'll email it to you.
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What happens if you miss or underpay
CRA charges instalment interest on amounts paid after the due date or on amounts that fall short of the required payment[6]. The rate is the CRA-prescribed rate for amounts owed to the government, which is set quarterly and published on the CRA website[6]. Interest compounds daily[6].
The mechanics are mitigated in two specific ways:
- The offset method. CRA applies an offset-method calculation that gives credit interest for early or excess payments. A taxpayer who pays one instalment late but pays the next instalment early can reduce or eliminate the net interest charge[6].
- The $1,000 floor for the additional penalty. An additional instalment penalty applies only when the year's instalment interest exceeds $1,000. The penalty is calculated as 50% of the amount by which the interest exceeds $1,000[6]. For most agents with modest underpayments, instalment interest stays below $1,000 and no separate penalty applies.
Instalment interest is separate from the late-filing penalty and the late-payment interest that apply when the T1 itself is filed late or when the April 30 balance owing is paid late[10]. A taxpayer can be current on instalments but late filing, or current on filing but behind on instalments — the two charges are calculated independently.
Instalment interest is not deductible. Unlike business expenses claimed on Form T2125, interest on overdue instalments cannot be used to reduce taxable income[6].
Tracking your estimated instalment obligation through the year
Instalments paid through the year are claimed on line 47600 of the T1 return[8]. CRA mails Form INNS1 (Instalment Reminder) and Form INNS2 (Instalment Payment Summary) showing the agency's record of instalments received; agents who paid an amount not yet reflected on those forms add the difference manually to line 47600 when filing[7].
Because the instalment obligation is calculated against figures only knowable at year-end — net business income, deductible expenses, CPP contributions, HST owing — a running estimate produced through the year tends to track reality more closely than any single static figure printed on a February reminder. The CRA-suggested no-calculation amount is anchored to two-year-old data and may differ materially from actual current-year tax for an agent whose business is growing or shrinking.
Agent Runway's tax engine implements the CRA-published instalment math directly. As deals close and net business income accumulates, the engine produces a running estimate of the year's federal income tax, provincial income tax, self-employed CPP1 and CPP2, and HST owing — and combines them into a quarterly instalment estimate aligned to the March 15 / June 15 / September 15 / December 15 schedule. The estimate updates as new transactions and expenses are recorded, so the figure shown in early September reflects actual income through August rather than a static projection made in February.
The free Canadian Realtor Tax Estimator produces an annualized tax figure from a single GCI input, broken down into federal income tax, provincial income tax, CPP, and HST. Dividing the resulting total by four approximates a current-year-method instalment figure for planning purposes — useful for agents whose first instalment reminder is still months away, or who are estimating obligations under the current-year option.
The mechanics of how the three methods interact with each other, and how an agent's choice of method affects full-year planning, are explored further in the tax planning guide for Canadian real estate agents.