Using tax deductions to own a country house for free?

Question

Hey guys,

I’m in Quebec, Canada and looking to purchase a cabin/country house for personal leisure purposes.

But I’m thinking; if I rented it out a let’s say 2 weeks of the year,  can I claim the other 50 weeks of the year that it won’t be rented as losses and deduct all the expenses? I figure if i can do that, the country house would be almost free for me to use the 50 weeks of the year.

Am i totally off here or can this work? Let me know your thoughts. Thanks guys. :)

Aaron K. · Answer

No that is tax fraud, because you'd only be able to claim the two weeks worth of expenses while the property was in service.

Roy N. · Answer

Account Closed

As @Huong Luu alluded, you would need to rent the property out for a significant portion of the year to convince the CRA you have a viable business and not simply a guise for tax avoidance.

Jaysen Medhurst · Answer

I'm no CPA, Account Closed, and I know nothing about Canadian tax rules, but I have to think the revenue service would never fall for this.

One strategy I have read about is to genuinely buy the place as a vacation rental. Then the 4X/year you go there on "maintenance and inspection" trips are business related and tax deductible.

Account Closed · Answer

@Roy N.

Yes, and that would be the plan. It would not be my place of residence; but rather a short term rental property that i can bring the family to during the slow season.

I wonder how many days or weeks it would need to be rented out for to show the CRA it is in fact a short term rental property first and a vacation house second.

Huong Luu · Answer

My accountant told me I couldn't do this 10 years ago in Ontario. AHAH. However what he did tell me was to deduct the expenses I needed to travel there for inspection/repairs/maintenance/research, etc, all expenses, and that I could use the cottage during the off season without an issue. The first 3 years, I rented the majority of the long weekends out and had about 50% occupancy, so I was able to use the cottage the rest of the time while getting it ready to rent. After the 3rd year, the summer rental was hot so I maximized on that and only used the cottage in the off season when there were no renters. Now that cottage is paid off and I rent it to a long term family. Keep in mind renting to cottagers is a lot more work if you do it yourself, which is why I went to long term. Message me if you want to know how I can still take a summer cottage trip every year and use that as a tax deduction.

Natalie Kolodij · Answer

Lol- no.

If you use it for personal use for more than 14 days you're losses are only limited to income- IE no losses.

This is in the US though. Talk to a Canadian tax pro to confirm there.

Using tax deductions to own a country house for free?

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