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Income tax write-off??

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Old 10-05-2006, 09:32 PM
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Default Income tax write-off??

Being a Canadian and exploring the possibilities of relocating South of the border, my father mentioned that there are some states where you could write off a new boat as part of your income tax...is this true? if so, which states does that apply to?
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Old 10-05-2006, 09:37 PM
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Default Re: Income tax write-off??

many boats are considered second homes by the IRS. This is a federal deduction and will also give you benefits in most states. According to the rules the boat must have sleeping, toilet, and "cooking" facilities. If it meets the criteria you can deduct the interest you pay on the boat from your taxable income.
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Old 10-05-2006, 09:39 PM
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Default Re: Income tax write-off??

far as I know its all of'em. If it has somewhere to sleep/ eat/ cook/ and a bathroom. You can write off a % of interest only.
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Old 10-05-2006, 09:49 PM
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Default Re: Income tax write-off??

This is a federal income tax deduction so the state does not determine detectability. However, all that is deductible is the interest on the loan, not the purchase amount. Also, you can only deduct interest on your first and second home, so if you already have a second residence and the interest is more than your interest on your boat loan, then it would be beneficial to deduct the residential interest over the boat interest. There are some other ways to deduct the interest on the boat if you already have a second home, but I can't give away all the secrets.
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Old 10-05-2006, 09:51 PM
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Default Re: Income tax write-off??

You are able to write of the tax paid on the purchase in NJ, they take the higher of the two. I was also able to write off the intrest on the note since it's considered a second home.
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Old 10-06-2006, 09:16 AM
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Default Re: Income tax write-off??

Another option is using your equity line to finance your boat. Obviously equity line limit & boat value dependant but in this scenario there isn't any second home criteria that needs to be met in order to write offf the interest.
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Old 10-06-2006, 09:30 AM
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Default Re: Income tax write-off??

Quote:
Originally Posted by NASCAT
Another option is using your equity line to finance your boat. Obviously equity line limit & boat value dependant but in this scenario there isn't any second home criteria that needs to be met in order to write offf the interest.
Yes, I thought about that as an option but when it comes time to sell the house all the equity would be locked up in a depreciating asset. If the Equity loan was used to update the house the value would increase incrementally. In my case I didn't want to have the boat tied to the house.
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Old 10-06-2006, 09:54 AM
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Default Re: Income tax write-off??

Indeed, it's a federal tax issue, not state. IRS publication 936 states that the mortgage interest paid throughout the year on your first and second homes may be written off of your federal income tax return. A home can be anything such as an RV, boat, etc. but must have "sleeping, cooking and toilet facilities."

From Publication 936:

"You can deduct your home mortgage interest only if your mortgage is a secured debt. A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that:

*Makes your ownership in a qualified home security for payment of the debt,

*Provides, in case of default, that your home could satisfy the debt, and

*Is recorded or is otherwise perfected under any state or local law that applies."

and a qualified home is defined as:

"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.
Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.

Second home. A second home is a home that you choose to treat as your second home."

http://www.irs.gov/pub/irs-pdf/p936.pdf
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Old 10-06-2006, 08:06 PM
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Default Re: Income tax write-off??

Thanks for all your feedback! Now to look for that second home...
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