The benefits of owning a boat are plentiful. Whether it’s sailing to paradise islands or anchoring off a lake dock, getting on the water with a dependable vessel is an experience most people enjoy and few ever forget.
Boat owners have the added luxury of being on the receiving end of some decent tax breaks too, so long as the right rules are followed of course. Here is a breakdown of the multiple tax deductions possible for folks lucky enough to own a seaworthy watercraft:
Home on the Water
Financed watercraft which has a berth, galley, and installed toilet qualifies for a mortgage interest deduction on a second home. Utilizing a boat payment calculator can help boat owners quickly configure how much they stand to shave off their debt to Uncle Sam. Of course, there can’t already be a second home in existence somewhere, as this would technically make a livable boat your third house, which is not covered by any IRS deduction.
Business, NOT Pleasure
When it comes to talk of boat-related tax write-offs the whale of the conversation is always the use of the vessel for business purposes. At the end of what seems like a write-off rainbow is the hope of having 50% of expense costs deducted from taxable income. Yes, it’s possible, but the paperwork may be enough to sink the ship. First and foremost, business must be discussed on board. Secondly, every receipt must correlate with location records and dates. Then the anticipated business benefits must be clearly outlined. Finally, the occupations of the persons being entertained must be tracked. If all of this is done, then boat owners may be able to see some tax relief.
It’s recommended that newly-made boat owners with itemized deductions seek to write off sales tax. This can only be done if the boat owner declines to take the state income tax deduction, as it cannot be taken jointly with the state sales tax deduction.
Personal Property Tax
Again, this is an option available to those with itemized deductions. State and local personal property taxes can be written off so long as they are annually imposed and sync up with the value of the vessel.
Fishing for Deductions
The Internal Revenue Service is currently retooling their online guidelines for fishing deductions. What we do know is that these deductions only apply to folks who get at least ⅔ of their income from fishing. Long story short, don’t be looking to write-off expenses associated with a few weekends of big catches sold to your fishmonger neighbor.
Boats provide an assortment of pleasure and business opportunity for those able to own them. Tax deductions exist for both, but don’t expect anything other than a tightrope process from the IRS if you plan on writing off boat-related business expenses. The ultimate takeaway when it comes to any kind of tax deduction is that the truth shall set you free. Don’t exaggerate, misconstrue, or otherwise misrepresent the facts. If legitimate write-offs exist, take them, and never fear. Tax breaks are there for a good reason, even for boats.