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Nautiduck
Master Marine Consultant

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USA
3704 Posts

Initially Posted - 02/16/2009 : 11:19:06

OK, it is getting to be tax time. How many of you are taking advantage of IRS rules that allow us to deduct interest on boat payments and other costs?

Here is a quote from the [url="http://www.boats.com/news-reviews/article/tax-breaks-for-boaters"]Boats.com[/url] web site:

"The IRS has generally determined, however, that any boat that has at least one berth, a permanent galley, and a head (even if it's just a Porta-Potti) qualifies for the second home deduction."

We cannot direct the winds but we can adjust our sails.

Edited by - on

aeckhart
Master Marine Consultant

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USA
1709 Posts

Response Posted - 02/16/2009 : 12:19:37

The rules only allow you to deduct interest from one mortgage, either a primary or a secondary residence. Genrally your home mortgage interest is a bigger deduction than your boat interest. Of course, if your mortgage is paid off, then that's another story. In my case, I used my primary residence as the interest deduction. I'm happy to report that both are now fully paid so I don't have a mortgage deduction period.

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dmpilc
Master Marine Consultant

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USA
4593 Posts

Response Posted - 02/16/2009 : 12:30:08

You might want to go back and re-check your facts about deducting mortgage interest. It is still possible, under certain conditions, to deduct mortgage interest on a "vacation home". Consult your tax adviser.

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Stu Jackson C34
Admiral

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844 Posts

Response Posted - 02/16/2009 : 16:21:47

We've been doing both for years (until we rolled 'em all together).

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John Russell
Master Marine Consultant

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USA
3444 Posts

Response Posted - 02/16/2009 : 16:39:26

We do both.

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Tom Potter
Master Marine Consultant

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USA
1913 Posts

Response Posted - 02/16/2009 : 20:04:07

Same here, we do both.

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dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 02/17/2009 : 09:00:39

A coworker friend of mine's toy is his 700hp '67 Camaro drag car. Even though this is just a fun hobby for him, his accountant found ways to make it tax advantageous too.

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pastmember
Master Marine Consultant

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2402 Posts

Response Posted - 02/17/2009 : 10:19:50

Both... duh!

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aeckhart
Master Marine Consultant

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USA
1709 Posts

Response Posted - 02/17/2009 : 12:13:58

And you are collectively correct. I had forgotten that while in the Army we owned a home in Virginia, lake front property in Michigan (our present home), and paying off the. You can understand my confusion..........or can you? It was 23 years ago.

Edited by - aeckhart on 02/17/2009 12:16:44

Dave Bristle
Master Marine Consultant

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Djibouti
10005 Posts

Response Posted - 02/17/2009 : 13:40:48

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by dlucier
 A coworker friend of mine's toy is his 700hp '67 Camaro drag car. Even though this is just a fun hobby for him, his accountant found ways to make it tax advantageous too.<hr height="1" noshade id="quote"></blockquote id="quote">"Found" or made up? Our tax system is essentially voluntary--sounds like he unvolunteered.

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dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 02/17/2009 : 14:42:40

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by Dave Bristle
 <blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by dlucier
 A coworker friend of mine's toy is his 700hp '67 Camaro drag car. Even though this is just a fun hobby for him, his accountant found ways to make it tax advantageous too.<hr height="1" noshade id="quote"></blockquote id="quote">"Found" or made up? Our tax system is essentially voluntary--sounds like he unvolunteered.
<hr height="1" noshade id="quote"></blockquote id="quote">

Actually, it has something to do with prize winnings offset by race expenses. Probably like they do with lotto winnings.

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Champipple
Master Marine Consultant

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USA
6855 Posts

Response Posted - 02/18/2009 : 15:20:49

We buy most everything with the HELO generally paying off what we put on every year. That plus the primary mortgage get deducted

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SailCO26
Captain

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USA
457 Posts

Response Posted - 02/18/2009 : 15:53:02

When I had a loan on my 26'er I deducted both while I had both, just the boat when I had boat only. By the time I bought my next house, the boat was paid off. The CP25 was a $ deal.

Now, I'm looking at a truck camper and am debating about financing that for the additional writeoff (but it probably wont be worth just paying $).

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delliottg
Former Mainsheet C250 Tech Editor

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USA
4479 Posts

Response Posted - 02/18/2009 : 16:17:28

We use our HELOC for major expenses as well. Currenty we're paying a bit over 4% on the loan, almost 2% less than our mortgage (we're looking into a refi).

We bought the F-250 with the HELOC, went to the dealer & wrote them a check. Paid it off, bought the new VW with the HELOC, in the process of paying that one off too. Boat's paid for. The good thing is I get to keep writing off my interest with the HELOC. And the HELOC's good for 15 years I think, maybe 20, don't remember.

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Dave Bristle
Master Marine Consultant

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Djibouti
10005 Posts

Response Posted - 02/18/2009 : 16:48:48

My home equity credit line is at 2.25% right now--adjusts monthly. Hold me back!!

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bigelowp
Master Marine Consultant

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USA
1776 Posts

Response Posted - 02/18/2009 : 20:34:03

Be careful in trying to re-fi as the apraised value of your home may have gone down enough that, while a better interest rate it is for much less of a line than you have now! I know some people who went to re-fi and ended up witha much smaller HEL.

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John Russell
Master Marine Consultant

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USA
3444 Posts

Response Posted - 02/18/2009 : 20:57:43

<hr height="1" noshade id="quote"></blockquote id="quote">Uh-oh, Sarge getting a slipmate?

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Dave Bristle
Master Marine Consultant

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Djibouti
10005 Posts

Response Posted - 02/18/2009 : 21:53:51

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by John Russell
 Uh-oh, Sarge getting a slipmate?<hr height="1" noshade id="quote"></blockquote id="quote">I'm dreaming of a Herreshoff Twelve-and-a-half...

</center>

Edited by - Dave Bristle on 02/19/2009 09:36:20

dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 02/19/2009 : 10:15:17

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by Nautiduck
 "The IRS has generally determined, however, that any boat that has at least one berth, a permanent galley, and a head (even if it's just a Porta-Potti) qualifies for the second home deduction."
<hr height="1" noshade id="quote"></blockquote id="quote">

As the others have mentioned, you can get around each of the above mentioned requirements by simply purchasing any watercraft (canoe, kayak, PWC) with funds from a HELOC. The government only thinks they eliminated the tax deduction for interest on personal consumer debt (cars, credit cards,...etc).

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pastmember
Master Marine Consultant

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2402 Posts

Response Posted - 02/19/2009 : 10:54:17

</center>
<hr height="1" noshade id="quote"></blockquote id="quote">
You are one of the few people I have ever known with enough class to pull off owning that boat, go for it.

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dmpilc
Master Marine Consultant

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USA
4593 Posts

Response Posted - 02/19/2009 : 12:22:39

Of course, you have to have enough deductions to itemize even to use HELOC interest, which means homeowners with a mortgage and/or large charitable giving or very large medical bills!

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pastmember
Master Marine Consultant

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2402 Posts

Response Posted - 02/19/2009 : 12:30:39

True, my house pays off next year and I will become a member of the Standard Deduction world; truth be told I kinda look forward to the simplicity.

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Dave Bristle
Master Marine Consultant

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Djibouti
10005 Posts

Response Posted - 02/20/2009 : 11:04:39

Now that I'm a retiree living almost solely on my nest-egg (suddenly very scary!!), things like health insurance premiums add up quickly relative to taxable income. Don't simply assume you shouldn't itemize...

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Gambit
Navigator

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USA
160 Posts

Response Posted - 02/22/2009 : 08:27:04

Remember that the mortgage and HELOC interest is only deductible to up to the loan amount that is equal to or less than your basis in your primary and secondary residences.

So, if you have enough equity to can jam in the new truck or even second boat with or without a head. However, if your lines exceed the basis in your residences the interest related to that is not deductible.

This is very much short-hand but an aspect that was not mentioned above. See your tax advisor for your particular situation.

Using the HELOC is a great way to finance vehicles but be sure to amortize it over the same amount of time you would have gotten from a bank, ie 48 months rather than 120 :).

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RTripp4830
Deckhand

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USA
3 Posts

Response Posted - 03/02/2009 : 06:34:58

We do both.

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Captain Bill
Navigator

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USA
148 Posts

Response Posted - 03/09/2009 : 19:53:15

And don't forget to add the HELOC interest expense applicable to your vehicle(s) to the dreaded alternative minimum tax computation. It's only deductible for income tax, not Alt. Min.

Bill

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