CND tax ? - Biz use of home

[Mike OReilly]

I am a full-time freelance writer/communications consultant/book designer. I work from my home-office, so write off a portion of our house's expenses (business use of home) against my income tax. When I move full-time onto our boat (and sell our house), I plan to carry on writing off a portion of our floating home's expenses against my income.

Is anyone else doing this? Any tips? Thoughts? Warnings?

[jackdale]

I would speak to your accountant for some expert thoughts.

[Connemara]

Hmmmm. I'm in the same (errr) boat... claim part of the house costs for office expenses. Hadn't thought of claiming boat costs when the time comes. I'll have to check with my crack personal accountant, but I don't see why not.

Connemara

[Mike OReilly]

Yes, I'll be checking with my accountant, but surely I can't be the first self-employed Canadian to move onto a boat. Since it will be my home-office, it seems the business use of home deductions should apply.

[hellosailor]

I would make a totally unfounded and rash guess that if cdn follows the same logic as our IRS, you might be required to "separate" one area of the boat for exclusive business use, same as for a home office in any other home. If that doesn't apply up there, then you probably will be OK.

The first advice was the best though: Ask a tax accountant.

If you are going to be successfully self-employed, it pays to find these things out in advance and for certain, directly from your tax authorities. There are all sorts of "gotchas", like, the part of your home that was used for business use, can be subject to different taxation when you sell the home. If you know that in advance, you can simply stop taking the business deduction in the last year. But if you don't know the rules up front--you can only pay.

What other people do, or have gotten away with, is never quite the same as checking with the source and getting their opinion.

[Mike OReilly]

Thanks HS. While Canada and US tax laws are quite similar, they are definitely not identical, which is why I'm seeking Canadian knowledge. I've been a self-employed writer/comms guy for over 25 years now, so am well-versed in the applicable tax laws. I agree, this is an essential part of running your own successful business.

I guess I'll dig into the CRA definitions. I could also seek a formal CRA ruling as well, but this tends to raise your profile over there -- something I'd rather not do .

[hellosailor]

I hear you, Mike. In the US, statistically, 25 years of filing self-employed would mean you are about five years overdue for an exam of some kind from them. About all you can do is dot the i's and cross the t's and try to keep that low profile. Oh, and put up a placard "Restricted area, authorized personnel only" on the door to the office compartment.<G>

[S/V Alchemy]

Originally Posted by Mike OReilly

Thanks HS. While Canada and US tax laws are quite similar, they are definitely not identical, which is why I'm seeking Canadian knowledge. I've been a self-employed writer/comms guy for over 25 years now, so am well-versed in the applicable tax laws. I agree, this is an essential part of running your own successful business.

I guess I'll dig into the CRA definitions. I could also seek a formal CRA ruling as well, but this tends to raise your profile over there -- something I'd rather not do .

This was a common ploy in the '70s and '80s: have "business lunches" at your YC, sleep it off aboard, and write off YC fees and boat depreciation as a CCA.

The CRA shot a hole in it. They had a valid point.

My take-away from this is as follows: One's boat cannot be a primary residence (unless it's a houseboat anchored to shore services). If you sell your house, you no longer have a primary residence.

This is precisely why we are keeping our house as a two-apartment rental property...that remains our "primary residence" even as we live aboard in some tropical lagoon. The CRA has offered no other option.

Of course, this means as invisible off-site, live-in landlords, we can write off all sorts of goodies. We can even maintain office space in the garage or basement for whatever landlord stand-in we hire to handle fuses, dripping taps or the occasional backed-up toilet. At the usual 30% CCA rate, naturally.

Another upside is that by keeping a primary residence, you maintain a sort of "legal presence" that is handy in keeping your Ontario health card going.

There are other ramifications too extensive to go into here, so I suggest you talk to an accountant, preferably one who owns a boat or is a snowbird with a boat in Florida. What I am implying is that there are ways to work a liveaboard situation that are advantageous and legal, but you have to know how the CRA interprets residency and rent-collection when you are an absentee landlord who appears to be quite present.

Needless to say, if you sell up and have no Canadian income, the point is moot, but there are scenarios in which this can be worked reasonably well.

[Mike OReilly]

Originally Posted by S/V Alchemy

This was a common ploy in the '70s and '80s: have "business lunches" at your YC, sleep it off aboard, and write off YC fees and boat depreciation as a CCA.

The CRA shot a hole in it. They had a valid point.

My take-away from this is as follows: One's boat cannot be a primary residence (unless it's a houseboat anchored to shore services). If you sell your house, you no longer have a primary residence.

Thanks for this Alchemy, but to be clear, I would never apply a CCA depreciation to any home, whether floating or land-locked. That gets you into capital gains/losses if you sell. Problematic at best.

I agree that the easiest thing would be to maintain a land-based residence. This may not be an option for us. But I don't see why living on a boat attached to shore services can be treated any different than one sitting on the hook ... Not saying you're wrong, but it doesn't make much sense to me (not that tax law has to make sense...).

In reviewing the Tax Bulletins, I see that a home is defined as "as a dwelling house, apartment or other similar place of residence in which place a person as a general rule sleeps and eats." My boat may stretch this definition, but it certainly will be the place were I "sleep and eat." Unless I'm to be considered homeless I have to live in some sort of "self-contained domestic establishment."

Originally Posted by S/V Alchemy

There are other ramifications too extensive to go into here, so I suggest you talk to an accountant, preferably one who owns a boat or is a snowbird with a boat in Florida. What I am implying is that there are ways to work a liveaboard situation that are advantageous and legal, but you have to know how the CRA interprets residency and rent-collection when you are an absentee landlord who appears to be quite present.

Yes, thanks. I will seek professional advice Alchemy. I just assumed my position wouldn't be all that unusual. Surely there must be lots of self-employed Canadians floating around working from their boats. These days, with high-speed net readily available, it is increasingly easy to do so.