Is anyone expensing their boat?
 

Is anyone expensing their boat completely? My accountant tells me that to totally expense my boat I need to compete. I am also told that poker runs are not competing. Is anyone expensing more then gas, a few repairs and entrance fees to a charity event (poker run)? If I had a car and took it to the track every weekend to compete I could expense that. I feel like there must be a way. Maybe it’s just wishful thinking, but I have to ask everyone before I give up trying.
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biggest problem with expensing vehicles (boat, cars) is that if you expense it completely, then sell the vehicle, you have to recapture the sale as income. The tax man will get you in the end, expensing only delays the tax occurance.

Thanks for you input. Is it possible to lease it with a $1 buy out? at the end of the lease it doesn't have any value and maybe easy to hide the sale?

I expense mine as a 2nd home. As long as you have a sink, potty, place to sleep, and means to cook,, you can wright it off. I also (at the advice of my accountant) write off my vehicle mileage to PR, as most (that I attend) are for charity.

Ona-Mission,
Gov't just changed near zero cost leasing rules in '07 I believe.(1$ buyout). There is an excellent way to expense boats however according to an accountant who gave an in depth presentation at my company a few years ago. He detailed the then current IRS rules applying to "second residences". As I recall there were requirements about sleeping quarters, toilet/bathroom/head, cooking area etc. Might be worth looking into; don't see a real problem with delaying tax consequences until we're in a better bracket (older). Dean5127 who's normally a regular poster here on OSO (tax season right now) could probably shed some light on this. Best luck to you. -Jeff

I think the second home classification allows you to right off the intrest paid on the boat, not expense it, providing it meets certain IRS ctiteria.

I am not a CPA, but had lenghty discussions with my CPA on ways of making my toys work harder for me. Again these work mostly as delay tactics, with the hopes of being in a better tax situation when they catch up with you.

Far smarter men than I have tried to out fox the IRS, and they have seen just about every trick in the book.



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I don't know how this applies to a go fast, but our CC is a charter operation. Whether it looses or makes money doesn't matter, you write 100% of expensives off same as you would if you were an owner operator with a truck.

If you had a Capt license I guess you could charge your guests, show some income and therefore be entitled to the write-offs?

I am not sure what exactly you are referring to when you say expensing. If you have a head, a bed, and a galley, you can write off the interest on the boat as a second mortgage. However, you can only write-off interest on two "homes".

The biggest issue to overcome when writing off acutal expenses, ie. gas, maintenance, etc., is proving that you truly have a business (ie. profit motive) rather than a hobby. I don't think you could convince an IRS agent that you enter poker runs to make a profit. I prepare the tax returns for an offshore race team and we sucessfully argued with an IRS agent that there was a profit motive and it wasn't a hobby, but the operations must be set up correctly.

Bottom line, most boating activities are hobbies. Any reducing in your tax liability by deducting your boating expenses can easily be eaten up in professional fees to defend your case and there is no guarantee of winning the argument. It's probably not worth it.

My boat is used for entertainment so i can write off the expenses. It is almost depriciated out which is one of the reasons i put it up for sale. but anything that i sell it for over what it is on the books for i have to pay capital gains.

you just have to work the numbers when you sell it

Plus you have to keep a record to prove it was just for entertaining clients and not for personal use

Meals and entertainment expenses are only 50% deductible. If you are taking clients out for entertainment, your tax preparer should only be deducting 50% of the total expense.

To avoid paying tax in the year of sale on the gain on the sale of the boat, it may be worth it to do a like-kind exchange. It doesn't avoid the tax liability, but it defers it to a later date. You can keep doing like-kind exchanges and defer the income for a number of years.