Dear David,
My wife & I just bought a time share in Oahu, Hawaii of one week every 2 years, that won't be ready for occupancy until 2009.
We paid cash as the they were offered us 13.69% interest to finance through them. We will be paying it off with our line of Credit at a 6.25% instead. My questions are these:
1.. What are the Income tax and other implications if any that would apply to a Time Share in Hawaii?
2.. Can we claim the interest paid from our line of credit to finance this investment?
3.. If we decide NOT to use it one year and rent it out, do we have to claim the income?
I would appreciate a response at your earliest possible convenience.
Regards,
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david ingram replies:
Most time shares are not considered to be investments but it could be I guess.
If it is the only second residence you have, the property tax portion of your annual charges and the interest on the loan to buy it can be used as itemized deductions on schedule A. If you have more than one time share (I have one client with seven), pick the one with the highest expenses as your second residence dedcution.
Of course, if you borrow the money to buy it agaisnt your main house, there is no limitation as long as the loan does not exceedthe original purchase price. Therefore, if you borrowed $100,000 against a paid for house you paid $100,000 for, the interest on that $100,000 is deductible on schedule A if you use it for anything from three time shares to one boat or a timeshare, boat and car.
If you rent it out, the rent would be taxable on schedule E and the tax and interest and maintenance fees would also be deductible on schedule E and there would be no deduction on schedule A.
----- Original Message ----
From: US / Canada Income Tax Help - CEN-TAPEDE <centapede at lists.centa.com>
To: CENTAPEDE <centapede at lists.centa.com>; CENTAPEDE-ca <centapede-ca at lists.centa.com>; jurock <webmaster at jurock.com>
Sent: Thursday, November 8, 2007 12:18:44 AM
Subject: US CANADA Buying Investment property in Hawaii - David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country
------------------------------------------ :
Hi Mr INgram
I tried into your website to see if I can get any information on the above topic with regards to
taxes and other situations that may come about. Are you able to guide me to the specific section in your website?
Many thanks
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david ingram replies
You will file a 1040NR with schedule E and 4562 and A Hawaii N-15 and GET tax return.
In Hawaii, there is a GET or General Excise Tax in addition to what you will find in the following. There is a GET which applies to all rentals of 4% and a further TAT (Transient Accomodation Tax) of 6% on rentals that are holiday rentals when you rent by the day or week.
the rest is anwered by this
------------------------------------------Expert: taxman at centa.com Date: Saturday March 03, 2007 Time: 02:22 PM -0500 QUESTION: We have a rental property in the US. Can I claim the property taxes paid on my condominium as a rental expense deduction on my Canadian taxes? Form T776 mentions only Canadian property taxes however, the general guide states that all expenses can be deducted. Subject: US Condo and Rental Expenses
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david ingram replies:
Anything that can be claimed on schedule E of the US return can be claimed on form T776
You need to do your Schedule E 1040NR first and then convert the US figures to the T776 on your Canadian return. If the condo is in Arizona, you would do a 140NR or if in Califormnia, a 540NR. Hawaii would be a 1040NR and a N-15 Hawaii state tax.
There is no state tax in Florida, Texas or Nevada, the other three popular places for a Canadian to have a rental US condo.
The difference between the two counties is the method of claiming depreciation. In the US, you MUST calculate thedepreciation and include it even if it creates a loss. The good news is that the operating loss caries forward as a future deduction agaisnt rent OR Capital Gains as opposed to non-resident losses in Canada which unfairly disappear into the ether.
In Canada, you do NOT have to claim it and if you do, can only claim enough to create a zero rental. Depreciation or CCA (capital cost allowance) as we call it can NOT be used to create or increase a loss.
Make sure that you do theUS returns, particularly if you are losing money. The penalty can be a minimum of $1,000 to $10,000 PLUS 30% of the gross rent for failure to file a US rental return by a non-resident.
We, of course, are ideally suited to look after these for you by fax, snail mail, email or courier.
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david ingram wrote:
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David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
email to taxman at centa.com
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits no move in or out
$1,600 would be for two people with income from two countries
$2,800 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales) are likely $50.00 for the first and $20.00 each after that.
Just a guideline not etched in stone.
This from "ask an income trusts tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax Immigration Wizard Antarctica Rwanda Guru Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention
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