You might’ve stored old faithful now that summer’s come and gone, but owning a boat is just like owning any other property – it must be reported when tax season rolls around. Here’s what you need to know for a successful filing, whether you’ve had one for years or in the market to buy.
This deduction if oft-overlooked, because you don’t receive the form that comes along with a home loan. However, if you qualify for the tax deduction, you don’t need a form from your lender.
What’s more, this is probably the biggest deduction you could take for your wave crusader (although not all of them qualify). If you finance your boat and make payments over time, listen up: you will qualify by paying mortgage interest on a loan secured for primary or secondary home. To qualify as a home, it must have cooking, sleeping, and toilet facilities. If your boat meets these requirements, and you do not rent or sell it, you can treat it as a home, regardless of how often to use it as such.
If your boat is more for fishing and less for sleeping, you can still snag some tax benefits. If you itemize your deductions, you can claim state and local income taxes, or state and local general sales taxes. If you take the latter, deduct your actual sales tax paid, or use the IRS’s tax tables. Either way, include the sales tax you paid on your boat, up to the amount imposed at the general sales tax rate. Now for personal property: state and local taxes on your boat are deductible if itemized, if the taxes are based on the value of the boat and imposed annually.
This one comes with a warning label – you cannot deduct business expenses on anything considered entertainment or recreation. However, you may be able to deduct expenses associated with your boat and business. If you hold an event on your boat for your business or clients, you may be able to deduct a portion as a business expense.
Take these tax benefits into consideration when filing as a boat owner, and always ask your tax preparer if you’re concerned about what qualifies – these benefits can help you float a bigger refund.
Sign up for our newsletter and be the first to find out when exciting IRS news happens. Yes, exciting. We're really into taxes.