Has anyone sold their home

[sandylynn]

Has anyone sold their home that they have used for home daycare...how does this affect your taxes when you sell as the home was used as a business?

[Suzie_Homemaker]

Why would it affect taxes? Home is personal asset not business asset. This why improvement not able be claimed but maintenance is.

Are you closing entirely so selling home mean close business or are you set up again in new residence?

[sandylynn]

I'm not selling but someone was telling me that if you operate a business out of your home, when you sell it....you will have to pay added taxes when you sell because you operated a business in the home...is this true?

[Busy ECE mommy]

Yes, I just heard about new rules coming into effect shortly that will make you pay capital gains on whatever increase in gain since you purchased, based on the % of square footage used for daycare purposes.

[kindertime]

I googled the question and this is what I got from TurboTax

Capital gain and recapture rules will apply if you deduct Capital Cost Allowance on the business-use part of your home and you later sell your home.

from this site:
http://turbotax.intuit.ca/tax-resources/sbt-home-expenses.jsp

So if I am understanding correctly, if I have never claimed capital cost allowance on my house, the capital gains wouldn't apply to me if I sold it.

[sandylynn]

Can someone define "capital cost allowance" for me...on the home

[sandylynn]

I have never claimed capital cost or depreciation etc ever...but from what I understand (and if anyone can correct me)....it doesn't matter...you will still be taxed!

[bright sparks]

Rewind, Rewind, Rewind....Do not panic. This does not apply to home daycare businesses. We are not registered business', and nor do we need to be. We are sole proprietors and capital is only calculated on our purchases made above $200 per item and then with an annual depreciation for tax purposes. Many years ago I considered registering as a business so I could use my gross income when applying for a mortgage etc. My accountant strongly advised me against it because it is at that point that the home becomes capital and then what you are talking about would apply. But that isn't a new thing at all, it has been around for many years. Don't believe everything you read online, especially business rules. Many of them do not apply to home daycare providers.

I have operated my daycare in 3 homes I have owned in Ontario. This concern you have is unwarranted. I have also closed my business down once before. Only thing that can occur at that time is when selling business items/equipment. Fortunately I didn't sell mine as I didn't get around to it yet, and since then I have reopened my daycare.

[sandylynn]

OH! So this would only apply to REGISTERED businesses? I came across this when I was watching CP24 "HOT PROPERTY" SHOW....they were talking real estate business and when one sells a home that they had a business in, etc. etc. I was thinking 'WHAT"!
:(

[Busy ECE mommy]

What specifies us being a registered business? So, if we have a business identification number(BIN ontario) are we considered a registered business, or only if we have a BN(business number)? I'm going to email my accountant.

[sandylynn]

Let us know what they say

[Busy ECE mommy]

I just emailed my accountant with a million questions, so we'll see what they say.

[Van]

Are you going to Sell your house if the answer suits you?

[Busy ECE mommy]

I got an email from my accountant saying that we do have to declare to the CRA when we sell our primary residence if we ran a business in it, but that we don't have to pay capital gains on a primary residence unless any of the following are true:
1) You have claimed CCA depreciation on the home itself relating to the business
2) You have made structural changes to the home for the sake of your business Ie. finished the basement to do daycare/added a bathroom for daycare/added a kitchenette for daycare/added a new exterior door or entrance for daycare etc or anything else structural
3)Your house retained the original house character from when you took ownwership of it IE. It still looks like a private residence from the inside and out, and doesn't look like a preschool or licensed daycare
If any of the above are true, it is posssible that you will pay the capital gain on increased value when you sell. She said check with your own accountant, as situations may vary.

[mela]

Question- if I moved in September and claimed the basement only at the other house and now my daycare is a shared space at new place how do I go about figuring this on the new taxes for expenses? Thanks

[Suzie_Homemaker]

This interesting Busy. I guessing that CRA will know who historically claimed for structural changes for day home so they will know to bill for this if day home owner not know about change.

[Rorence]

After reading the whole post, I have learned more about this topic. Thank you so much.