Topic: Should I lease?

[Northernridge]

Okay,

slightly off-topic question, but related.

My wife is a Yoga Instructor, and is a sub-contractor to a few different gyms and studios in the city.  She has two major 'employer's that she contracts out to (a few classes each, per week), and a few smaller ones that she teaches at once or twice a year.

The companies paying her do NOT deduct taxes.  WE will be responsible for paying her income tax come tax time, therefore deductions will be very important here.

1) In this case, for tax reasons, would she be considered a sub-contractor?

2) We have financed our Altima.  I would say (I will calculate it more exactly closer to tax time using mileage) that 90% of the Altima's use is driving to/from the gyms and studios where she works.  Will I be able to claim 90% of the Altima's payments against our taxes?  Can I claim gas?  Can I claim insurance?

3) Can I claim a portion of our house towards her taxes?  She does all her prep work at home.  What can I claim?  Mortgage?  House Ins?  Hydro/Water?  What is a standard percentage that gets claimed in this case?

This will be the first full year that she will have subcontracted, and she will have made above the basic personal amount, therefore we will need to start claiming items if we don't want to get nailed too badly at tax time.

Thanks in advance for any answers.

Your wife has more than one significant client so she is an independent contractor will not be considered an employee of one of her clients. She's responsible for her own taxes. Also, if her services are taxable she is required to collect and remit tax. In Manitoba if she fails to collect PST, she is on the hook for it after the fact, not her clients.

I'd get advice on the the auto claim...I think she'll be ok. We can't claim auto use for commuting to work but can if we drive from home directly to a customer. In any event keep a log because 90% work use could be a flag for CRA.

For claiming home deduction for work you need a dedicated space and are able to deduct that percentage of square footage from the whole house expenses. The space s/b for work only and CRA could ask to see it in an audit. If your wife does her prep/book keeping at the kitchen table, it's not deductible.

[Great_Big_Abyss]

Your wife has more than one significant client so she is an independent contractor will not be considered an employee of one of her clients. She's responsible for her own taxes. Also, if her services are taxable she is required to collect and remit tax. In Manitoba if she fails to collect PST, she is on the hook for it after the fact, not her clients.

I think the standard is if you bill under a certain amount, you don't have to pay PST.  As far as I know, we are currently (and will be) under this amount.

I'd get advice on the the auto claim...I think she'll be ok. We can't claim auto use for commuting to work but can if we drive from home directly to a customer. In any event keep a log because 90% work use could be a flag for CRA.

The way I was going to log it was as such.  My wife keeps a log of every class she has taught on her calendar.  I would simply use Google Maps to get get a distance from our house to each studio, and apply the mileage according to how many classes she had at each gym.  Subtract her work mileage from the overall mileage for the year on our vehicle, and we have the percentage of the vehicle that was used for work.

For claiming home deduction for work you need a dedicated space and are able to deduct that percentage of square footage from the whole house expenses. The space s/b for work only and CRA could ask to see it in an audit. If your wife does her prep/book keeping at the kitchen table, it's not deductible.

Thanks for that.  We have no dedicated space, therefore no claim on the house.

[Northernridge]

^I forgot about the minimum, do double check though because I think it's pretty low (the threshold above which you have to collect). You do get paid a commission for your troubles. 

[pi314]

I think it's ~30K

[Great_Big_Abyss]

She's under $20K per year, for sure.

[aquadorhj]

She's under $20K per year, for sure.

btw,  yoga instructor, eh?  u lucky dog, u.   

[Great_Big_Abyss]

She's under $20K per year, for sure.

btw,  yoga instructor, eh?  u lucky dog, u.   

 

[Solstice2006]

I am visiting my friends dad (an Polish accountant), super cheap in the way he lives.  I suspect, we will come to the conclusion to register my business.  I will add my wife as an employee, I think.  Discuss to pros and cons.  Discuss deductions for the car, house, etc.  Then off the dealership next week.  Have thought about using car cost Canada for getting a better deal.  Not sure it will help that much, as the vehicle I want is not on the lot.  I was going to just offer to take 5% off the MSRP. 

[ArticSteve]

Whether one leases or has an owned vehicle, it's all tax detectable if the vehicle is used for business purposes.  The question is;

what's the projected tax rate on net income?  20%?  then divide that by 50% and one realizes a whopping 10% reduction in tax. (50% being the most one could use as a write off of vehicle expenses without drawing attention). 

[wing]

My accountant was pretty clear that CRA is really picky about vehicle expenses and businesses owning vehicles these days.  She thought it was better that I owned a vehicle myself and deducted expenses to run the vehicle (Be it mileage, repairs etc) rather than having the business own the vehicle.   Less red flags

[ArticSteve]

2) We have financed our Altima.  I would say (I will calculate it more exactly closer to tax time using mileage) that 90% of the Altima's use is driving to/from the gyms and studios where she works.  Will I be able to claim 90% of the Altima's payments against our taxes?  Can I claim gas?  Can I claim insurance?


Your wife will need to be the named sole owner.  She will require a business rating on the Altima's insurance policy regardless.

Max deduction will be 50% unless your wife's the registered owner of another vehicle of similar value.

Your wife should also have Errors and Omissions Insurance.  If she declines that coverage then she should transfer sole ownership of the house to you.
 

[Solstice2006]

Artic, where have you been?  I was hoping you would be the first to reply to this post.  Guess I should have added Toyota in the title....

So there is no advantages in leasing a vehicle over financing one for tax deductions? I understand you can deduct things from a financed vehicle, just thought there were more advantages over leased vehicles, hence why so many business owners do it...

[ArticSteve]

So there is no advantages in leasing a vehicle over financing one for tax deductions?

If one is purchasing in the month of November or starting the business activity in November/December, there is minimal difference.  2014 would be depreciated @15% and 2015 depreciated @ 30%.  Interest on the loan if there is one is also deducted.  You'd need to confirm this as I don't handle this sh*t anymore.

Individuals lease because it's easier to get financing.  Monthlies are lower/less capital involved.

However, one needs to be paying a good hunk of tax to make it really worthwhile.

I'd see how things go before committing to a lease.  You will need business rated insurance coverage on whatever you drive.  It's about another $150. depending on what/whos in the vehicle.

[Solstice2006]

So there is no advantages in leasing a vehicle over financing one for tax deductions?

If one is purchasing in the month of November or starting the business activity in November/December, there is minimal difference.  2014 would be depreciated @15% and 2015 depreciated @ 30%.  Interest on the loan if there is one is also deducted.  You'd need to confirm this as I don't handle this sh*t anymore.

Individuals lease because it's easier to get financing.  Monthlies are lower/less capital involved.

However, one needs to be paying a good hunk of tax to make it really worthwhile.

I'd see how things go before committing to a lease.  You will need business rated insurance coverage on whatever you drive.  It's about another $150. depending on what/whos in the vehicle.

Your right, I probably couldn't afford your rates.  I will ask my accountant if it makes a big difference whether I start the business / lease the 2015 vehicle now, or wait till January 2015 / lease the 2015 vehicle then.  Yeah I planned to get business insurance.  It's a 0% lease. 

[ArticSteve]

Miscommunication here.  the 15% and 30% rates of depreciation apply to OWNED vehicles either newly purchased or already owned.  Leases - matters not.

I was not commenting on as to when you start you're enterprise.

[Hannibalsmith]

I am visiting my friends dad (an Polish accountant), super cheap in the way he lives.  I suspect, we will come to the conclusion to register my business.  I will add my wife as an employee, I think.  Discuss to pros and cons.  Discuss deductions for the car, house, etc.  Then off the dealership next week.  Have thought about using car cost Canada for getting a better deal.  Not sure it will help that much, as the vehicle I want is not on the lot.  I was going to just offer to take 5% off the MSRP.

This has got to be one of the most creative ways to justify a new car purchase I have seen on this forum!

[Solstice2006]

I am visiting my friends dad (an Polish accountant), super cheap in the way he lives.  I suspect, we will come to the conclusion to register my business.  I will add my wife as an employee, I think.  Discuss to pros and cons.  Discuss deductions for the car, house, etc.  Then off the dealership next week.  Have thought about using car cost Canada for getting a better deal.  Not sure it will help that much, as the vehicle I want is not on the lot.  I was going to just offer to take 5% off the MSRP.

This has got to be one of the most creative ways to justify a new car purchase I have seen on this forum!

And my teacher said I wasn't creative enough with my stories. 

[Northernridge]

I've asked the buy/lease question so many times of my accountants over the years and continue to be told that it does't much matter. There are other factors to consider as has been pointed out above.

[Ex-airbalancer]

I've asked the buy/lease question so many times of my accountants over the years and continue to be told that it does't much matter. There are other factors to consider as has been pointed out above.

And remember the smaller the business the more likely to get audit 
Been in business for 29 years, I buy my vehicles, and just hand over the bills to the accountant to put things into the right column   

[Solstice2006]

I've asked the buy/lease question so many times of my accountants over the years and continue to be told that it does't much matter. There are other factors to consider as has been pointed out above.

Even if there isn't many advantages to leasing, I suspect I will lease anyway.  Not sure I would be approved to finance a Mazda6 GS.  As I haven't worked legit for a few years.  So I would like to register my business, and keep records, that way down the road, I have proof of income for larger loans.  I was approved for a Nissan Versa Note 3-4 months ago without a problem.  So I suspect leasing a Mazda6 shouldn't be a problem.  Since the rate is the same whether I finance or lease, doesn't really matter.