Working while liveaboard and filing taxes?

[KingGuppy]

Before my wife and I make a purchase and become full-time liveaboards, is there anything taxes-wise we should be aware of before purchasing?

We both work from our home offices and are able to take deductions for the office, car, gas, and insurance. Are there any deductions like these we should be aware of with liveaboard full time while working and cruising?

How does it work for the YouTubers out there living aboard full time as well?

Thanks

[Orion Jim]

A CPA or a tax attorney could answer any question. The free advice you will receive on a sailing forum is worth what you paid for it. Once the taxman is on your tail they never leave you alone……

[fxykty]

Well, if you’re not asking about cruising internationally then it’s pretty easy - home office and business expenses are the same on a boat as in a mobile home as in a fixed home, etc. Take that for what it’s worth as I’m not a tax accountant nor am I in your jurisdiction. Don’t you have an accountant? Ask them!!

If you want to travel internationally and continue working then it becomes a whole lot more difficult, depending on how visible your work is. You will of course pay taxes and claim expenses wherever you are tax resident. You may also need to secure work visas and pay local taxes in the country where you are visiting, even if you won’t be working for anyone in that country. Check with the relevant immigration and tax departments. Or you could enter as a visitor and keep your work off the books in the country you are visiting. Depending on the country, that may or may not be legal.

[GreenWave]

Originally Posted by KingGuppy

Before my wife and I make a purchase and become full-time liveaboards, is there anything taxes-wise we should be aware of before purchasing?

We both work from our home offices and are able to take deductions for the office, car, gas, and insurance. Are there any deductions like these we should be aware of with liveaboard full time while working and cruising?

How does it work for the YouTubers out there living aboard full time as well?

Thanks

Do you have a CPA or tax attorney now, because If you are taking home office deductions you probably should have one They would be the ONLY ones to consult on this.

[sailorboy1]

unless you have a space on the boat (and even now at your house) that is only used for work I don't think you can do a deduction

[TrentePieds]

Ask others have said: Ask a professional tax accountant for advice.

Then verify his advice by testing it against you own reading of, in this jurisdiction, the Tax Act and the Regulations thereto. Don't forget that "precedent" counts! This means that danger lurks not only in the Act and Regulations but also in the Interpretation Bulletins. You have a heckofalot of reading ahead of you!

You will find that Expenses of Home Office are ONLY deductible if the space for which expenses are claimed, is dedicated to business use ONLY and not at any time in the taxation year used for domestic purposes.

Having been in Public Practice I've seen the big hammer drop on people who chose to dissemble on their tax returns.

I would think that if your residence is a boat, a claim that some part of it were dedicated to business purposes would have little credibility and might very well trigger an audit. In this jurisdiction the "tax man" can, once an audit is called for, go back and review you returns as far back as he chooses. Could you withstand that?

Just be a good boy and pay your taxes.

All the best.

TrentePieds

[cofc]

Originally Posted by KingGuppy

Before my wife and I make a purchase and become full-time liveaboards, is there anything taxes-wise we should be aware of before purchasing?

We both work from our home offices and are able to take deductions for the office, car, gas, and insurance. Are there any deductions like these we should be aware of with liveaboard full time while working and cruising?

How does it work for the YouTubers out there living aboard full time as well?

Thanks

Will you maintain property and use that as your home address? If not (and you don’t already live in FL or another no income tax state) you can become a resident of FL through St Brenden’s Isle and avoid State income tax altogether. That’s been a great saving for us.

[jmschmidt]

If you live and work remotely then your earnings are generally taxable by the government entity (state and city) controlling your physical location.

This applies to property you live in or on that your own, rent or live free in (mom's basement). This is true be they a house, car, apartment, boat, camper-van or pup-tent.

Hawaii has one of the highest percentage of remote workers who are residents of other states in the US as well as the highest (and going higher to 15%) state income tax.

Guess what remote workers? You are liable to pay Hawaii State income tax on every dime you earn while physically in the State of Hawaii.

If you are a self-employed free-lancer you are also required to obtain a Hawaii General Excise Tax License and pay that tax as well (currently 5.5% on Oahu and 5% on the outer islands).

I'm sure other states and foreign countries have similar laws. Not so you say? Well maybe they just haven't caught you yet.

Why do you think the NFL Pro Bowel was moved to Florida? The players and employees of the Pro Bowl organization got tired of paying tribute to the greedy politicians in Hawaii. Ditto for movies and television shows. They shoot every scene they can out of state and only shoot in Hawaii what they need to reinforce the shows' titles.

[Montanan]

Residential boat offices require the taxpayer to regularly use the office and forbid using the designated office space for any other purpose. The boat must be your principal place of business to qualify for the US Federal IRS deduction and the vessel must have designated spaces for cooking and sleeping so as to qualify as to being a residence.

Basically, unless one designates one of the cabins solely as "the office", you will not be able to deduct boat office expenses.

The biggest issue that you may invoke multiple jurisdictions of income taxation if you voyage to other states or countries. And one will need to obtain work related visas if you intend to work in other countries.

[fxarcher]

Here is what you want to avoid at all costs
A former friend of mine came back to his office as white as a sheet.
He winked at me and I followed him into his office.
He indicated for me to close the door.
At that point, I was really getting concerned and I thought maybe something had happened to his family.
Turns out he had just come back from an Internal Revenue appointment.
Here is what he told me: He was let into the office of his auditor who never looked up or offered him a chair but kept working without looking up.
He finally figured it was safe to sit down and sat there for quite a long time.
Finally, the auditor adjusted his files and his pen also without looking up.
He then looked at my friend who was clutching his files and the shopping bag of receipts etc. (This was before computers), and he said the following: Now, Mr. H... let's get one thing straight from the start. I don't have to prove anything to you and you have to prove everything to me.
My friend said it went downhill from there.
So, that brings me to the best advice I ever got regarding this, and that is this, avoid audits at all costs, and never ever go to an audit yourself.
Always let a professional handle it for you.
He can sit there, one professional to another, saying things like, well, as I understand it... or, as I was told... or, my understanding is as follows...

So, listen to the people here who tell you to get proper tax advice, you can not go wrong.
Good Luck.

[contrail]

Sadly, and I am only partly joking, the modern way is to ignore all professional advice, no matter how easy or inexpensive to obtain, and replace it with amateur online advice from people one does not even know. I guess it is more fun or feels more independent, as everyone knows, the experts are all "bought" by someone else with an agenda, or may even be pedophiles! CF is no different

[KingGuppy]

Appreciate all the advice here. I believe my main question was answered, but you guys brought up another interesting one.

As for deductions for living/working aboard, it seems unlikely. Maybe a "home office" in a cabin, but that's doubtful, and we don't want to risk it.

But now im wondering about the working from Bahamas and not having real address in Florida if we were to sell our home. We had planned on get a UPS address that our mail would go to, and I thought I'd just continue paying taxes as if I was a Florida resident. Is this not the case?

We plan on cruising florida/bahamas for most of the year, and then heading north for the hurricane months.

[redneckrob]

Originally Posted by KingGuppy

Appreciate all the advice here. I believe my main question was answered, but you guys brought up another interesting one.

As for deductions for living/working aboard, it seems unlikely. Maybe a "home office" in a cabin, but that's doubtful, and we don't want to risk it.

But now im wondering about the working from Bahamas and not having real address in Florida if we were to sell our home. We had planned on get a UPS address that our mail would go to, and I thought I'd just continue paying taxes as if I was a Florida resident. Is this not the case?

We plan on cruising florida/bahamas for most of the year, and then heading north for the hurricane months.

If you're already a FL resident you're fine. The deal with state taxes is proving to the "losing" state that you actually no longer owe them taxes. So if you retire to your boat in the Bahamas from NY you'll face issues proving to NY that you're no longer a NY resident and now a FL resident for tax purposes. But if you wanted to keep your NY residency for tax purposes you would have no problem. Since you're already a FL resident there's no one to try to claim you, so you're fine staying a FL resident even if you never spend time there.

You may technically need a work visa to work in the Bahamas, although they have no income tax so there aren't any tax issues. If you're working remotely there you probably won't have any issues, but if you ever try to set up shop you'll face consequences. Setting aside a part of your boat as an exclusive office may not be a good strategy if you also plan to claim you're not really "working" for visa purposes.

[KingGuppy]

Originally Posted by redneckrob

If you're already a FL resident you're fine. The deal with state taxes is proving to the "losing" state that you actually no longer owe them taxes. So if you retire to your boat in the Bahamas from NY you'll face issues proving to NY that you're no longer a NY resident and now a FL resident for tax purposes. But if you wanted to keep your NY residency for tax purposes you would have no problem. Since you're already a FL resident there's no one to try to claim you, so you're fine staying a FL resident even if you never spend time there.

You may technically need a work visa to work in the Bahamas, although they have no income tax so there aren't any tax issues. If you're working remotely there you probably won't have any issues, but if you ever try to set up shop you'll face consequences. Setting aside a part of your boat as an exclusive office may not be a good strategy if you also plan to claim you're not really "working" for visa purposes.

We're still bouncing between keeping our Florida house or selling it. I had read about an FEIE credit that is great for working/living abroad, but it sounds like it would be difficult to qualify for because I'd have no actual address in the bahamas.

The home office idea just seems to be asking for trouble from the tax man.

[Shrew]

The standard deduction in 2021 is $25,100 for married taxpayers filing jointly in the US.

I have worked from home for 15 years. I haven't been able to get my deductions, mortgage interest, boat loan interest and my entire office expenses to exceed he standard deduction in years.

How much over the standard deduction does your itemized deductions go?

The other side to deducting a home office is the capital gains tax you pay on that percentage of the property when you sell it. If you're home office is 15% of your property, you get to pay taxes on that 15% of the sale price of the property as a capital gains tax. Hopefully the returns from the itemized deduction exceeds the tax bill.

After all, if the standardized deduction is $25,100 and you itemize a deduction of $27,000. You're not saving the $1,900. Your saving paying the taxes on $1,900 (about $600 @ 32%). Sell a house for $300K, that 15% of office now translates to roughly $45,000 subject to a capital gains (%15 or roughly $6,750). It'll take you 11 years to reach the ROI of the capital gains based on the savings of the office deductions.

You can only pay taxes to one state. It will either be the state you work in or the state you live in, but it can't be both. If you choose to live in a state that doesn't have an income tax, but work in a state that does, or vice versa, the state that charges income tax will levy the tax since you're not paying in the other state. I lived in NH my entire life. I worked in Massachusetts for over 20 years. I paid Mass income taxes because NH didn't levy an income tax. That is simply how it works.

You're going to need drivers license. This typically requires that you declare residency in that state. Consider that if you choose to declare a non income state (NH, FL, etc) for residency and license purposes.