I am curious how easy it is to write off our Catalina 25. I am told it is possible, but what do I need when I head over to the accountants when he does our taxes. How much can be written off? Thanks!
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I'm no CPA, but...
I'm pretty sure that if the boat is considered a 'second residence' then you can write-off the interest on the loan but that's about it. Also, to qualify as a second residence, I beleive it must meet certain requirements, like bathroom and kitchen facilities, etc. Hope somone who knows more than me chimes in...
I'm pretty sure that if the boat is considered a 'second residence' then you can write-off the interest on the loan but that's about it. Also, to qualify as a second residence, I beleive it must meet certain requirements, like bathroom and kitchen facilities, etc. Hope somone who knows more than me chimes in...
yes and no
You can write off the interest paid on the loan (if you have one) if you can eat, sleep and go to the bathroom on the boat. If you charter it yourself you are subject to USCG rules and regs and your insurance will increase, so it's probably not worth it. If you place the boat in a charter fleet you will have income to offset.
You can write off the interest paid on the loan (if you have one) if you can eat, sleep and go to the bathroom on the boat. If you charter it yourself you are subject to USCG rules and regs and your insurance will increase, so it's probably not worth it. If you place the boat in a charter fleet you will have income to offset.
Write Off
You can write interest of loan off, providing you have galley and head. Or if you financed with Home Equity Loan, interest is tax deductible either way.
You can write interest of loan off, providing you have galley and head. Or if you financed with Home Equity Loan, interest is tax deductible either way.
One More Requirement to Write Off Interest
You must spend an X (I forget how many exactly) number of nights in it. Not sure how you would prove it. Actually there is another stipulation to this it can only be done as a second home If you do not claim the interest write off on your primary residence you cannot on your boat either. Your CPA may interpret the laws differently but that was how it was explained to me by mine.
You must spend an X (I forget how many exactly) number of nights in it. Not sure how you would prove it. Actually there is another stipulation to this it can only be done as a second home If you do not claim the interest write off on your primary residence you cannot on your boat either. Your CPA may interpret the laws differently but that was how it was explained to me by mine.
From IRS.gov
From IRS website... only one link included... "A second home can include any other residence you own, and treat as a second home. You do not have to use the home during the year. However, if you rent it to others, you must also use it as a home during the year for more than the greater of 14 days or 10 percent of the number of days you rent it, for the interest to qualify as home mortgage interest." So, if you just own it outright and don't rent it out at all there is no minimum use rule. "A home includes a house, condominium, cooperative, mobile home, boat, or similar property that has sleeping, cooking, and toilet facilities."
From IRS website... only one link included... "A second home can include any other residence you own, and treat as a second home. You do not have to use the home during the year. However, if you rent it to others, you must also use it as a home during the year for more than the greater of 14 days or 10 percent of the number of days you rent it, for the interest to qualify as home mortgage interest." So, if you just own it outright and don't rent it out at all there is no minimum use rule. "A home includes a house, condominium, cooperative, mobile home, boat, or similar property that has sleeping, cooking, and toilet facilities."
Maybe I Should Check Again
Wonder if I can write the interest off the boat even though I have none on my house?
Wonder if I can write the interest off the boat even though I have none on my house?
What about "entertainment"
Wonder if I can write off the boat if I use it for taking clients on a sunday cruise? Being self-employed, this might work???
Wonder if I can write off the boat if I use it for taking clients on a sunday cruise? Being self-employed, this might work???
Home Equity loan
I combined my boat and my home equity as one loan, and the interest paid on the loan is partially tax deductable. You should talk to the bank and your accountant to get all the facts.
I combined my boat and my home equity as one loan, and the interest paid on the loan is partially tax deductable. You should talk to the bank and your accountant to get all the facts.
Business entertainment deduction
Business entertainment on your own boat is no different from business entertainment anywhere else...it would be same as if you invited clients to dinner at your home (yes, you can deduct a dinner party at home if it's ONLY for business purposes, and not just inviting a client/friend to your wife's birthday party in an effort to make it a deductable expense). You can't deduct any portion of your home OR boat expenses, but you can deduct the actual out-of-pocket expenses for that occasion--food, drink, fuel, transient dock charges at a waterfront restaurant, etc--would be deductable, but only a portion of it...At the time I sold my company 5 years ago, only 50% of business entertainment restaurant receipts were deductable...and it may even be less than that now. Boat owners have been trying to find a way to get the gov't to pay for all or part of their boats for as long as people have owned boats. The only viable deduction is the "second home" (or primary residence if you live aboard) interest deduction on any mortage. There are ways to deduct more, but they're more hassle than they're worth. For instance, putting it into charter just means you also have to report the charter income. YOu prob'ly won't make as much as chartering will cost you, and SOME of the losses will be deductable...but not all. Besides, tax deductions don't come off your taxes, they only reduce your taxable income. A $1000 deduction doesn't save you $1,000 in taxes, it only reduces your taxable income by that much...resulting in an actual tax saving of less than $50, but additional work for your CPA that runs your bill to him up $200.
Business entertainment on your own boat is no different from business entertainment anywhere else...it would be same as if you invited clients to dinner at your home (yes, you can deduct a dinner party at home if it's ONLY for business purposes, and not just inviting a client/friend to your wife's birthday party in an effort to make it a deductable expense). You can't deduct any portion of your home OR boat expenses, but you can deduct the actual out-of-pocket expenses for that occasion--food, drink, fuel, transient dock charges at a waterfront restaurant, etc--would be deductable, but only a portion of it...At the time I sold my company 5 years ago, only 50% of business entertainment restaurant receipts were deductable...and it may even be less than that now. Boat owners have been trying to find a way to get the gov't to pay for all or part of their boats for as long as people have owned boats. The only viable deduction is the "second home" (or primary residence if you live aboard) interest deduction on any mortage. There are ways to deduct more, but they're more hassle than they're worth. For instance, putting it into charter just means you also have to report the charter income. YOu prob'ly won't make as much as chartering will cost you, and SOME of the losses will be deductable...but not all. Besides, tax deductions don't come off your taxes, they only reduce your taxable income. A $1000 deduction doesn't save you $1,000 in taxes, it only reduces your taxable income by that much...resulting in an actual tax saving of less than $50, but additional work for your CPA that runs your bill to him up $200.
Tax Time
Darren has it correct regarding your ability to deduct any interest on your boat loan. However in order to take advantage of this deduction you will need to have enough of these types of deductions, such as mortgage interest, property taxes, and state income tax, to make it worth while to itemize instead of using the IRS’s standard deduction. Rick – If your taking the standard deduction perhaps that is what your accountant was referring to. Some banks won’t automatically send a “mortgage interest statement” so you may have to ask for it. Regarding the possibility of writing off the cost of the boat, I believe you either would have to setup a business which chartered the boat or if your self employed show how you were using the boat to promote your business. I don’t think it’s a good idea to try this and I’d certainly see my tax guy before I did.
Darren has it correct regarding your ability to deduct any interest on your boat loan. However in order to take advantage of this deduction you will need to have enough of these types of deductions, such as mortgage interest, property taxes, and state income tax, to make it worth while to itemize instead of using the IRS’s standard deduction. Rick – If your taking the standard deduction perhaps that is what your accountant was referring to. Some banks won’t automatically send a “mortgage interest statement” so you may have to ask for it. Regarding the possibility of writing off the cost of the boat, I believe you either would have to setup a business which chartered the boat or if your self employed show how you were using the boat to promote your business. I don’t think it’s a good idea to try this and I’d certainly see my tax guy before I did.
I want Peggie's Tax Bracket
Peggie, $50 on a $1,000 deduction is just a 5% bracket. I don't know too many boat owners that can get it down that low and still afford to pay slip fees. Heck, our state tax rate is over 9% (Calif.). Add that to a federal rate of around 20 - 30% and the $1,000 deduction is worth about $300 - $400. Better than a sharp stick in the eye. Dan Jonas (S/V Feije II)
Peggie, $50 on a $1,000 deduction is just a 5% bracket. I don't know too many boat owners that can get it down that low and still afford to pay slip fees. Heck, our state tax rate is over 9% (Calif.). Add that to a federal rate of around 20 - 30% and the $1,000 deduction is worth about $300 - $400. Better than a sharp stick in the eye. Dan Jonas (S/V Feije II)
tax write off
With a cell phone and a lap top on the boat, in port, you could make business calls, set up appointments, keep books etc. Wouldn't it then become an office?
With a cell phone and a lap top on the boat, in port, you could make business calls, set up appointments, keep books etc. Wouldn't it then become an office?
No, you don't 
If you think every $1,000 tax deduction in, for instance, the 35% tax bracket knocks $350 off your income tax bill, it's no wonder some people think that tax cuts only benefit the rich! Bill, home offices are deductable only if you conduct at least 50% of your business from it and no other office space any where else. There was a case a few years ago...an anaesthesiologist, who did his billing from a bedroom in his home he'd converted to an office. The IRS disallowed the home office deduction because he spent more than 50% of his working hours in operating rooms--which they ruled was outside "office" space. I'll never forget his quote: "what do they expect me to do, generate my invoices in surgery and stuff 'em to the patients' hospital gown pockets while they're still on the table?"
If you think every $1,000 tax deduction in, for instance, the 35% tax bracket knocks $350 off your income tax bill, it's no wonder some people think that tax cuts only benefit the rich!
Bill, home offices are deductable only if you conduct at least 50% of your business from it and no other office space any where else. There was a case a few years ago...an anaesthesiologist, who did his billing from a bedroom in his home he'd converted to an office. The IRS disallowed the home office deduction because he spent more than 50% of his working hours in operating rooms--which they ruled was outside "office" space. I'll never forget his quote: "what do they expect me to do, generate my invoices in surgery and stuff 'em to the patients' hospital gown pockets while they're still on the table?"Curious
Peggy, I do think that a $1,000 tax deduction in a 35% bracket amounts to a $350 reduction in taxes. Am I missing something here? And tax cuts benefit those who pay the taxes that happen to be cut. Not sure what that has to do with the math. Last time I checked, 35% of $1,000 was still $350. Dan Jonas (S/V Feije II)
Peggy, I do think that a $1,000 tax deduction in a 35% bracket amounts to a $350 reduction in taxes. Am I missing something here? And tax cuts benefit those who pay the taxes that happen to be cut. Not sure what that has to do with the math. Last time I checked, 35% of $1,000 was still $350. Dan Jonas (S/V Feije II)
Sounds to me
as if some of you guys are begging for an audit. Man, I do what I can to avoid one.
as if some of you guys are begging for an audit. Man, I do what I can to avoid one.
Don't Have to be in 35% Bracket
You don't have to be in the 35% bracket to make it worthwhile. Even in the lower brackets when you include the state tax, the savings on $1000 can be significant.
You don't have to be in the 35% bracket to make it worthwhile. Even in the lower brackets when you include the state tax, the savings on $1000 can be significant.
Tax Write-Off
BOATU.S. TAX TIME TIP: HOW TO DEDUCT A BOAT LOAN January 21, 2004 - The Boat Owners Association of The United States (BoatU.S.) wants boaters to know that as long as your vessel meets the criteria for a second home, the Internal Revenue Service (IRS) should have a deduction for you. IRS Web site at http://www.irs.gov. IRS Publication 936
BOATU.S. TAX TIME TIP: HOW TO DEDUCT A BOAT LOAN January 21, 2004 - The Boat Owners Association of The United States (BoatU.S.) wants boaters to know that as long as your vessel meets the criteria for a second home, the Internal Revenue Service (IRS) should have a deduction for you. IRS Web site at http://www.irs.gov. IRS Publication 936
You may be deduct the financing
You can deduct the interest if it meets the qualifications for a second home. I don't recall what all the qualifications are but I know one is that your boat must have a head and basically you could live aboard. Anything deducted beyond the interest is going to be a real reach unless your boat produces some kind of income for you like chartering and such. Jim Bean Counter
You can deduct the interest if it meets the qualifications for a second home. I don't recall what all the qualifications are but I know one is that your boat must have a head and basically you could live aboard. Anything deducted beyond the interest is going to be a real reach unless your boat produces some kind of income for you like chartering and such. Jim Bean Counter
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