I have herd that you can deduct the intrest on your boat loan. Does any one have any insight to this? What form do you use? What are the qualifications for this deduction? Thanks
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It depends...
Rick, As I understand it, the interest is deductable the same as a home loan, depending that the boat has liveaboard accomidations, and that a certian amount of time is spent aboard by you. Same as a houses, you can only do this for a total of two units. The boat is usually treated as the second home. This is all done on Schedule A, same as the primary home. To be sure, check with a CPA or tax accountant. Steve
Rick, As I understand it, the interest is deductable the same as a home loan, depending that the boat has liveaboard accomidations, and that a certian amount of time is spent aboard by you. Same as a houses, you can only do this for a total of two units. The boat is usually treated as the second home. This is all done on Schedule A, same as the primary home. To be sure, check with a CPA or tax accountant. Steve
I wish I could...
But not being a homeowner, I don't have enough to itemize my deductions. My boat would qualify as a second home if I had a first. As long as it has a head, a galley (stove), and a berth it qualifies a liveable.
But not being a homeowner, I don't have enough to itemize my deductions. My boat would qualify as a second home if I had a first. As long as it has a head, a galley (stove), and a berth it qualifies a liveable.
See IRS webpage...
On the IRS webpage you can look up publication 17 (page 159) and publication 936 (page 2) for the details. I did it yesterday and yes if you have a boat with sleeping, kitchen and toilet facilities you can claim it as a second house, I didn't see any requirements about staying on the boat for any amount of time. But if you don't have enough deductions to exceed the standard deduction the point is moot...
On the IRS webpage you can look up publication 17 (page 159) and publication 936 (page 2) for the details. I did it yesterday and yes if you have a boat with sleeping, kitchen and toilet facilities you can claim it as a second house, I didn't see any requirements about staying on the boat for any amount of time. But if you don't have enough deductions to exceed the standard deduction the point is moot...
Interest on boat loan is deductable IF
the boat has sleeping quarters, an enclosed head, and installed cooking facilities (throwing a sleeping bag, portapotty and campstove aboard a day sailer won't work). Although it qualifies as a "second home," you do not have to own a "first home" to take the deduction. Even if you don't have enough deductions to itemize without it, depending upon the amount of the boat loan and your interest rate, the interest on the boat loan alone or in combination with your other deductions may be enough to exceed the standard deduction, especially if the loan is new...'cuz during the first years of any loan, almost all of the payments are interest. It's certainly worth investigating. Btw, ONLY the interest on the boat loan is deductable. Maintenance, dock fees, etc are not.
the boat has sleeping quarters, an enclosed head, and installed cooking facilities (throwing a sleeping bag, portapotty and campstove aboard a day sailer won't work). Although it qualifies as a "second home," you do not have to own a "first home" to take the deduction. Even if you don't have enough deductions to itemize without it, depending upon the amount of the boat loan and your interest rate, the interest on the boat loan alone or in combination with your other deductions may be enough to exceed the standard deduction, especially if the loan is new...'cuz during the first years of any loan, almost all of the payments are interest. It's certainly worth investigating. Btw, ONLY the interest on the boat loan is deductable. Maintenance, dock fees, etc are not.
I you can Charter it out
you can expense everything, including travel to and from wherever you keep it. Set it up as a business or a rental property.
you can expense everything, including travel to and from wherever you keep it. Set it up as a business or a rental property.
Yes, but...
You can only deduct expenses for the boat if the boat is bringing in any income. And, to take any deductions, you also have to report the income. There are also other rules about what percentage of the time the boat is actually available for charter vs. your use of it. So just setting it up on paper as a charter boat without ever actually chartering it won't work. About the only boat related expenses you can get away with are any legimate business entertainment aboard--actual food, booze served to clients and fuel used while they're aboard. I spent 15 years in the marine business, btw...and my CPA was also a boat owner whose approach to deductions was "it's iffy, but worst case, they'll only disallow it...you won't go to jail if they do" (my kinda CPA). So if there were a way to deduct a boat, trust me--we'd have found it!
You can only deduct expenses for the boat if the boat is bringing in any income. And, to take any deductions, you also have to report the income. There are also other rules about what percentage of the time the boat is actually available for charter vs. your use of it. So just setting it up on paper as a charter boat without ever actually chartering it won't work. About the only boat related expenses you can get away with are any legimate business entertainment aboard--actual food, booze served to clients and fuel used while they're aboard. I spent 15 years in the marine business, btw...and my CPA was also a boat owner whose approach to deductions was "it's iffy, but worst case, they'll only disallow it...you won't go to jail if they do" (my kinda CPA). So if there were a way to deduct a boat, trust me--we'd have found it!
One more IF...
... the loan for which you deduct interest for the "second home", assuming it meets all the other stated requirements, must be SECURED by the asset, in this case the boat. So, if you used a personal loan, or any other non-secured instrument: no can deduct.
... the loan for which you deduct interest for the "second home", assuming it meets all the other stated requirements, must be SECURED by the asset, in this case the boat. So, if you used a personal loan, or any other non-secured instrument: no can deduct.
Excellent Point Tim
Its one thing to deduct the interest, its another thing not to have it flagged in the system. Generally deductable interest is interest secured by real property like a personal residence, second home, residential rental property or a livaboard boat. The interest recipient, usually a bank, issues a Federal Form "1098" and its this form which pretty much "legitimizes" the deductability of the expense. Remember, you get the copy of the "1098", the original is sent to the IRS and is posted to your account, just like the home mortgage interest on our homes. If you claim this interest expense on Schedule A of your tax return and it is not supported by form 1098, ultimately the return will get bounced. The moral of the story is, if you are paying a boat loan, make sure the lender will issue a Form 1098 and if not, refinance with someone who will! Regards, Bob Fliegel, CPA
Its one thing to deduct the interest, its another thing not to have it flagged in the system. Generally deductable interest is interest secured by real property like a personal residence, second home, residential rental property or a livaboard boat. The interest recipient, usually a bank, issues a Federal Form "1098" and its this form which pretty much "legitimizes" the deductability of the expense. Remember, you get the copy of the "1098", the original is sent to the IRS and is posted to your account, just like the home mortgage interest on our homes. If you claim this interest expense on Schedule A of your tax return and it is not supported by form 1098, ultimately the return will get bounced. The moral of the story is, if you are paying a boat loan, make sure the lender will issue a Form 1098 and if not, refinance with someone who will! Regards, Bob Fliegel, CPA
another alternative.
If you own a home you can always get a 2nd loan on the home. This works for boats, cars or whatever your heart desires. The only problem with this idea is if you default. You loose your home but you still own a boat.<g>
If you own a home you can always get a 2nd loan on the home. This works for boats, cars or whatever your heart desires. The only problem with this idea is if you default. You loose your home but you still own a boat.<g>
A good reason
to buy a more expensive boat with all the equipment you want than to buy a cheaper one to which you have to add stuff either paid for with cash or bought on credit. If it's part of the boat when you buy it, the interest on that portion of the loan is deductible. If you have to add it, no deduction.
to buy a more expensive boat with all the equipment you want than to buy a cheaper one to which you have to add stuff either paid for with cash or bought on credit. If it's part of the boat when you buy it, the interest on that portion of the loan is deductible. If you have to add it, no deduction.
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