Remember.......you can only deduct interest on the first $1.1M of the loan(s).My understanding is you can write-off the interest component if you claim the boat as a second residence pursuant to it meeting the very grey requirements of the IRS code surrounding interest paid on Boats, as outlined in Publication 936:
For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.
The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.
Truthfully, I think the best and safest bet, is to have the boat on an equity line, use the equity line for your boat gas, insurance, etc... and let your cash go elsewhere. Therefore, if you have an equity line that is at prime, or prime minus (mine is prime minus .5), then you are paying 4-5% interest on the line less a net tax effect equivalent to your tax rate - say 30%. At that point you are paying essentially 2.8% interest (4%*(1-.3)), and if you can't use your cash to make more than 2.8% you are doing something wrong. This also lowers your adjusted gross income and hence your tax liabiility.
My .02 - I hate debt, but like it or not, it doesn't hurt to "play" with someone else's money.