Boat loan interest: Tax deductible?

[Fred Ficarra]

Stu,

I think converting would be harder than ending the war on drugs/Americans.Edit; Stu, I forgot to mention that I'm no proponent of saving. We live in a country with an inflationary economy. Saving cash loses money and nothing is gained. (from a passbook account) The saved-cash needs to be intelligently invested.

 

[Ross]

There is much to be said in favor of paying cash

IF you can wait until you have accumulated the funds. But if you must make a purchase in order to acquire the means to accomplish a task for which you will be paid money in excess of the cost of the asset and of the value of your time, then it is good business to borrow the funds. But it is not good business to borrow money for purposes that will yield no return other than personal gratification.

 

[ITMaster]

I don't know what your specific circumstances are,

but for me, my home was fully paid for. I went to the lending institution that I had used to finance my home with and that I had established excellent credit with and took out a loan for the cost of the boat, which at the time was new. I had put a small token good faith deposit of $15K down when I made the counter offer to the dealership on the boat which they accepted. The loan was just under $150K which I obtained for 5.25% interest. The loan is an unsecured signature loan that has both my wife and I on it. They were very happy to accomodate us. So, as far as the IRS is concerned, and what they see on my 1040 long is that I have a home mortage loan out there and I fully deduct 100% of the interest. I have always done my own taxes. I have always taken the deductions allowed by the tax codes. My finances are not complicated, yet they are complex enough that I itemize capital gains, losses, business, charitable, educational,investment and deferred retirement expenses and everything else that I can think of and document. I have never been questioned by the IRS for any of my deductions or the methodology that I have always used and I doubt they will start now. I say the answer to your question should be without a doubt yes.

 

[Fred Ficarra]

Cool. You're much like me. One caveat

You DON'T deduct 100% of your interest with your income tax return. You deduct the amount of the interest that you paid to the lender from your gross that your income tax is figured on. The Treasury is NOT paying your interest.

 

[richard]

itmaster

"The loan was just under $150K which I obtained for 5.25% interest. The loan is an unsecured signature loan that has both my wife and I on it. They were very happy to accomodate us. So, as far as the IRS is concerned, and what they see on my 1040 long is that I have a home mortage loan out there and I fully deduct 100% of the interest."If your loan is unsecured it is not deductible. The fact that the IRS hasn't audited you does not mean that it is. You have been lucky in the game of "audit roulette". Unfortunately, most people who play it are and it creates great unfairness in the tax system. Maybe I shouldn't say unfairness, but if all the people who take otherwise unallowable deductions didn't it would be a lot more fair to the people who don't. Fred, one does deduct 100% of the interest. However, the tax saved is based on the amount deducted multiplied by your tax rate. I understand what you are saying, the government doesn't pay all of the interest, but I think the way you are saying it is confusing.Cheers.

 

[Fred Ficarra]

Yeah,

I confused me too! But I know enough to not pay interest just to deduct it.