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Catalina/Capri 25/250 Sailor's Forums

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Tax Break

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Tray
Navigator

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Namibia
224 Posts

Initially Posted - 01/04/2003 : 09:55:47

My dealer informs me that I can deduct the interest paid on my boat loan as interest paid on a second home. From my limited research so far, it seems that for a boat to be considered a second home, it must have sleeping accomodations, a galley, and a head. My 250 seems to fit into that category. Does anyone have any experience with this?

Thanks.

Tray
C-250WB #554
"Weeny Bean"

Edited by - on

oldsalt
Admiral

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USA
578 Posts

Response Posted - 01/04/2003 : 10:10:09

Dealers have been telling their clients this, as a selling point, ever since the income tax laws were ammended to eliminate the deduction for consumer interest.

However, this practice is "iffy", at best, especially for a vessel with the "accomodations" and size of a Cat 250.

And the boat dealer will not shoulder the responsibility for any back taxes and penalties that you may incurr, based on his advice, in the event that your deduction is eventually disallowed.

That pleasure is reserved for the taxpayer.

After discussing this issue with my accountant, I decided to forego the deduction.

You might consider talking with yours.

Regards, Oldsalt

Edited by - oldsalt on 01/04/2003 10:11:14

Edited by - on

bren737
Captain

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291 Posts

Response Posted - 01/04/2003 : 11:31:13

Tray,

I'm not an accountant, but I did stay at a Holiday Inn Express last night. . . actually, I've had the following explained to me by several people who do take the deduction, one of which is in accounting. I think Mark Melchoir may be up on this if you want to contact him. It seems I recall him saying that you can claim it under "other interests and expenses" related to home-ownership in some way.

The 250 does qualify (head, bed, and galley). As it was explained to me, the head must be something more than just a porta-pottie (as in a C-22). The 250 makes the cut since it has a dedicated, enclosed head facility, even though it may only have a porta-pottie as the facility. I think the real test (I'm not as certain on this one) is that you must "live-aboard" for a total of two weeks during the year. Not consecutively, but a total of 14 days throughout the year. I am told a log-book with proving dates of "residence on board" is sufficient.

Bren Peterson
C250WB, #642, "Ruah"
San Antonio, TX

Edited by - on

John G-
Admiral

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793 Posts

Response Posted - 01/04/2003 : 11:34:44

You need to be able to prove that you “LIVE” on the boat and actually use it as a second home. The bar is not too high on this it’s only 14 days but if you go home at night after a day sail you are pushing it. Quite a few people with larger boats and loans use this write off with no problem. In Oyster Bay quite a few of us city rats "live" on our boats all weekend every weekend during the 6 month season.
Peregrine really is my second home, but I paid cash.
JG 

[url="http://www.peregrinefund.org/"]<img src="http://www.peregrinefund.org/images/intro_mid_image.GIF" border=0>[/url]
 John G- "PEREGRINE" C25-#4762 FK

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dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 01/04/2003 : 12:21:21

From the "Instructions for Schedules to Form 1040", 2002 Instructions for Schedule A, Itemized Deductions, Lines 10 and 11, Home Mortgage Interest:

"A home mortgage is any loan that is secured by your main home or second home. It includes first and second mortgages, home equity loans, and refinanced mortgages. A home may be a house, condominium, cooperative, mobile home, boat, or similar property. It must provide basic living accommodations including sleeping space, toilet, and cooking facilities." - IRS

Now, I've never taken this deduction since what I've paid for my boats is generally what new boat buyers have paid in interest, but from the way I read this, it doesn't matter what size the boat is or what type of head is installed, only that is have a place to sleep(cockpit with sleeping bag?), a toilet(would a chamber pot/bucket count?), and cooking facilities(Magma rail grill or sterno can?). I poked around the IRS website, but I couldn't find anything more specific.

Don Lucier, 'North Star'
C25 SR/FK
On the hard, 200ft from Lake Erie

Edited by - on

Douglas
Master Marine Consultant

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1595 Posts

Response Posted - 01/04/2003 : 14:43:19

Ill be claiming all of the finance cost and any other fee I can claim on Triska. You bet. Why give the I.R.S. any more than they are due. Its your money. Now lets see can I get a renters credit for my slip fee ???<img src="http://im1.shutterfly.com/procserv/47b2cc10b3127cce9309f921ac7b0000000410" border=0>

Doug&Ruth
Triska (Alberg 29)
Tacoma Wa.

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ClamBeach
Master Marine Consultant

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3072 Posts

Response Posted - 01/04/2003 : 18:59:29

Triska is a lovely vessel... with her size you shouldn't have any trouble "defending" your deductions.

It looks like you're moored right below downtown Tacoma. (I travel up there often as part of my job.) Tacoma is hands-down my favorite city... and one of the few urban areas I could stand to live in.

Currently maintaining two holes in the water...'77 Venture 23 and new to the family,
'78 Catalina 25

Edited by - on

Douglas
Master Marine Consultant

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1595 Posts

Response Posted - 01/04/2003 : 21:35:55

Yep thats Tacoma. I have a nice new slip at the Foss Waterway Marina. I have a 12' wide by 30'Long slip all to myself. New docks sure are nice. Marina use to be called Totem Marina but is now under the new waterfront development company. Lots of new projects going in including a planed new visitors marina for the glass museum.

Doug&Ruth
Triska (Alberg 29)
Tacoma Wa.

Edited by - on

n/a
deleted

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163 Posts

Response Posted - 01/06/2003 : 11:53:22

The note you are claiming the interest deduction on must be secured by the boat. Since we weekend on Teasel it was easy to get the residency requirement and we deducted the interest a mortgage interest on a second home. This was 1986-1988, and rules may have changed slightly; I recommend checking with the IRS. If you meet the rules, take the deduction.

Edited by - on

Tray
Navigator

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Namibia
224 Posts

Response Posted - 01/06/2003 : 13:07:21

I called the IRS help line, and the lady I spoke with asked me a lot of questions such as:

Does the boat have eating, sleeping, and toilet facilities?<img src=icon_smile.gif border=0 align=middle>
Is the loan secured by the collateral of the boat?<img src=icon_smile.gif border=0 align=middle>
Is the boat used for personal use only (never rented out)?<img src=icon_smile.gif border=0 align=middle>
Is my combined gross income less than 100 something thousand dollars?<img src=icon_smile.gif border=0 align=middle>
Do you treat the boat as a second home?<img src=icon_smile.gif border=0 align=middle>

Based on my answers, she said the boat qualifies. I asked about the 14 day requirement, and she said that doesn't apply anymore. She said I just needed a form 1098 from the lender. I made sure to write down her ID number just in case. I realize the IRS takes no responsibility for incorrect information their people provide, but if I get audited, at least I can show that I made an honest attempt to get the right answer.

Tray
C-250WB #554
"Weeny Bean"

Edited by - on

Bruce Baker
Captain

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USA
402 Posts

Response Posted - 01/06/2003 : 14:38:33

I looked into a boat loan, but I chose to go with a home-equity loan instead. Not only is the interest rate really cheap, there's no question that it's tax deductible.

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jellyfish
Navigator

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USA
171 Posts

Response Posted - 01/06/2003 : 17:46:41

been deducting the Jellyfish ever since we had her. most C25s fullfill the regs for the deduct, as said before all it has to have is bathroom(head)cooking(galley) and sleeping arrangements. one note: you can only have one second home!

Edited by - on

dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 01/06/2003 : 19:52:31

"I looked into a boat loan, but I chose to go with a home-equity loan instead. Not only is the interest rate really cheap, there's no question that it's tax deductible." Bruce Baker

Are you sure you can deduct home equity interest if it was not used to buy, build, or improve your home?

"In most cases, you will be able to deduct all of your home mortgage interest. Whether it is deductible depends on the date you took out the mortgage, the amount of the mortgage, and your use of its proceeds." - Pub 936 Home Mortgage Interest Deduction, Internal Revenue Service, Department of the Treasury

That's Bruce Baker,...right?

Don "Hardball" Lucier,
Chief Auditor and Lead Prosecutor

Edited by - dlucier on 01/06/2003 19:55:44

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Gloss
Master Marine Consultant

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USA
1916 Posts

Response Posted - 01/06/2003 : 20:39:09

I wonder what your income had to do with deductability.

Thomas Jefferson once said something like: "The power to tax, is the power to destroy"

Frank Gloss

Frank

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