How do you write your hobby off to your business?
 

Ok, guys... I have several successful businesses and have purchased a new boat. I have been paying more and more taxes and truly getting sick of it. The bleeding never stops and it's only getting worse. I noticed a lot of people doing sponsors and lots of racing. But, is this really just a front for your hobby? I'm not really into racing. Don't make that kind of money to waste! Lol...you guys are in a different league than me.

I am interested in how some of you write off some or most of your boating expenses. Outside of some gas and a few small things I have never really wrote anything else off. I am curious what some of you do to push the envelope. My accountant seems to never have many options for things like this. I am considering registering the boat in Delaware for the purpose of sales tax. But, is this just a matter of time before ohio ask for this as well?

Interested in ways to help write off some expense that will not be truly illegal! Lol... Outside of some vinyl wraps for advertising our something.

Looking for suggestions or things you might do. If, you don't feel comfortable sharing on forum please email me direct. Thanks for your help.:poopoo:

Looking for new business opportunities, put advertising on boat (!), etc

I have heard of people registering boats in Deleware,can someone tell me more about this and how it works?

In ohio you pay tax on boat purchase when you register the boat in ohio. If, you never register the boat in ohio then you don't pay taxes. I just registered one last year in Delaware and I had no issues. In fact, it help me sell the boat because the buyer ended up registering it there as well which saved him around 7k in taxes as well.

As long as you use your boat in Delaware 60 days a year you are able to register it in the state of Delaware. And of course i use my boat there 60 days a year! lol...This means you send them the title and they send you back the registration and a little card in place of title for ownership. You don't have to have a Delaware address it cost me like $90.00 for 2 years I think to register the boat.

Once you sell the boat you just give the card to new owner and they can transfer the numbers or ask for title back. It worked out great. Delaware does not collect any kind of sales tax on the boat. I know it sounds to good to be true!

I was skeptical as well but had no issues.

If you choose to sell a boat related product via a simple business or website. You would need a boat, insurance, dockage and fuel to provide demo's, instruction and/or gain access to buyers.

Good Luck.

I usually have the company pay for the fuel, insurance, and storage of the boat. That adds up to me.

The boat itself is a personal expense. However, I did write off the interest from my last boat on my personal taxes as a second mortgage due to the overnight amenities it had.

Buck

Look at the scenarios that fit your lifestyle best.

-Delaware/out of state wont work around here. They see you 3-4 times and its over. They will make your life difficult till it has Florida registration.

-Overnight amenities is a good one but we got more deductions as entertainment expenses. Depending on who is with you when you boat it is entertainment. So, the fuel, payments/interest and food are deductible.

All depends on "your" story and what you do with it.

http://www.delreg.com/yacht.cfm.

Contact them... They are very good to deal with

Would think just like guys write off planes to the company, and their wifes car, and the home office. You know that higher taxes on the wealthy is what will bring this country out of its funk, right? You got to pay your fair share.
And you don't get a say in whats fair.

Not sure how much people are going to be willing to talk since I'm sure it goes into a "gray area" tax-wise but I have noticed a LOT of the heavy hitters with big $$$ boats put their boats in their business's name or they create a small LLC business just to put their toys in its name so they can write them off and not be personally held responsible for them should the bottom fall out.

what about setting up a boat rental business and then you "rent" the boat out 5-6 times a year to friends for $50/$100 a day

I suppose that would only work for 3 years seeing as how that would make no profit.....but by then you have a severely depreciated "asset" to sell from your rental business to "whoever" (being you)

Forget tax savings for a minute.

By having your boat in your company's name you risk the possibility of lawsuits affecting your revenue stream if there is an accident.

Been there.

If you want to write off anything other than the occasional fuel or maintenance bill for "client entertainment" then you have to be able to convince the IRS that you need that boat to conduct your type of business.

I have friends who have setup an LLC and obtained distributor accounts for marine parts, then sell parts to all their boating friends at little or no markup. Personally, I would'nt want to be the guy who has to explain to the auditor why you're writing off 20k or more worth of depreciation and interest per year on an LLC thats grossing 10k or less.

Looking at all of these responses. There seems to be no slam dunk! Life is still too good to go to jail. Not looking to be illegal but maybe push the envolope a little. I do write off some gas and do a little entertaining for that matter that is business related but can't see writing off a boat of 300k. Just wished there was a little light I could see at the end of the tunnel for small business owners. It seems every day I am challenged with growth, health care, additional taxes that limits me from growing. Doesn't make since to growing and add on any longer when you will in turn give most or all back!

Try to figure a way to be more creative with what i have verses working hard and longer for less.

This guy is going to cripple all of us in the next 3 years!

This is sort of on the same subject.

Does anyone own their boat under an LLC to buffer themselves in the event of an insurance or other type of claim?
Some of my friends who race cars have "Such & Such Racing LLC" own the car to help protect their personal assets in the event of an accident. You can show expenses and income through it as well.

I don't know much about it but i have heard you can set up an LLC in Montana. I have a friend who has his Fountain Motor coach and a couple of high dollar cars in a Montana LLC. I believe it was to avoid paying taxes. From Waht i understand you have a Montana Attorney do the paper work and have a P.O. Box in Montana.

Keeping the boat in your name is the best way to keep the IRS from asking questions. In addition to writing off the occasional fuel bill and food/drink tabs, you can also rent the boat to your business for those "client" outings. Who is to say what your rental fee is? How many "client" outings did you have during the course of the boating season? Everything is a gray area as long as it isn't every day or excessive.

Most of the stuff above is going to fall WAY below the IRS radar unless they are digging around in your life for other more unscrupulous issues.

I will explore putting my next boat in an LLC for protection.

For the TAX piece - I just put it on an equity line so I can at least write off the interest. VERY safe.

I'd be more worried about the liability issues than tax issues.

In fl, commercial registration costs the same as personal. However, insurance becomes a new game....as in cost goes up.

I have several....and do rent them. However, I boat for free. Test and tune, repair test, rent prep. They all cut into the bottom line, but ultimately...it is a win win. At the end, you net less on your Corp filing but continue to reap the rewards of income from the llc as well lower tax on the Corp. Yes, you then pay on income from the llc, but consider it found money...

Oh....and it's legal.

You are talking charter.....

I believe that the original poster is talking about trying to transfer some of his boating expenses from "personal" to "have my business pay for dat". :) Personally (regarding boats), I keep business just that......business. Do you also have a single checking account for personal and business?

If you dont plan to travel much it may be easier for you to register it in a neighboring state and raise fewer DNR eyebrows than a distant state.
Most state registrations have a usage requirement such as "primarily" used in their state. Some base their annual personal property tax on where it is on January 1 or if it is in the state longer than 3 months for instance.
Out of sight, out of mind is best when dealing with taxes sales and PPT. Private storage instead of public, dont leave it on the lift for long periods if you have a slip.
Find some people willing to help you out but down play your actual strategy when Average Joe asks.

Depending on the tax codes of Ohio, there may be multiple options. All depends on how tax savvy you want to become (or pay someone to be).
If you have that Nortech on the way, I would definately do my homework or pay someone. Initial tax savings alone could be huge, not to mention annual PPT.

These tax planning steps are mostly exclusive to those taking the next step of writing down purchase and operating costs.

If something happens that is bad enough they will come after you personally. An umbrella policy is always good for the last line of defense.

No, separate accounts....otherwise it is not legitimate. Not talking about charter, bare boat commercial. This simply means I INTEND to rent my vessel(s) to third party non beneficiaries.

As far as umbrella, I have encountered instances with osprey and Lloyds where uscg licensing, and inspection were required. If our humble hero is not a uscg captain, he would need to hire a 3rd party liaison (like me) and put that person on the payroll. 1099 or w2 depending on the arrangement made.

Bringing this up again.

Considering an LLC in Montana to register all of my cars under.
Any other experiences?

I just want to see your car collection.

Enlighten me. Did you throw a dart at a large map of the US and hit that state, or is there something significant about Montana?

Buck

+1, inquiring minds want to know.

no sales tax, used to wash titles for export. The department of Homeland Security and all the manufactures have been watching the state pretty close as of late.

Just get a dealers license unless you own land in Montana.

How can one get a dealers license in a state they don't reside in without having a "lot" or "showroom" to substantiate having a dealers license? I personally have looked into getting a dealers license in Virginia to dodge property tax, not because I want to sling used cars or buy **** at an auction, but merely because I tend to switch vehicles a few times a year and it was not financially viable.

Our there's always the novel idea of going by the book and paying your taxes. Just a thought.

I can't speak for VA. I am not familiar with their tax code.

Dealers license without actual dealership is quite easy if you want to "partner up" into one.. Look into creativeautobusiness.com or dealer link etc..

I have opened up a llc for boating dealership. But, speaking to others that have done this in florida it's not very successful. I hear this has been a huge issues with all patrol. I have heard that patrol watches all boaters registration numbers. If, they notice you boat more than 90 days in florida regardless of whether or not you are a TRUE dealer of not they will slap a sticker on your boat giving you x amount of days to register your boat and pay the taxes due or remove it from florida waters.

This loop hole is a huge revenue issue with the state of florida. Everyone is going all out to get any and all money they can from everyone.

I've used the equity line to address interest but believe USCG Vessel documentation will also help you avoid the sales tax thing as long as you bought out of state.NC has sales tax & annual recurring Personal Property Tax. As long as your boat isn't in a marina or dry storage an out of state purchase & vessel documentation should help.

To my knowledge NT Angler the best way to write a boat off as a business expense would be via entertainment. So as long as you can keep a log as to who you had on the boat, when & are able to explain how entertaining NASCAT could benefit you / your business then you are good. A CPA friend of mine said just keep records, write down names You interact with & record the dates they were on your boat. I've done something similar w/ Poker Runs almost as if. I offered a PR experience for a fee. The fee represents the cost of the entire event divided by all parties present. My insurance agent wasn't real happy about this b/c he said I can't have a personal ins policy then charge others money, that would require a commercial policy. Long story short my cat insurance w/ agreed value was barely $2500/yr No exclusions & I told him I didn't make $$$ just divided the actual expenses amongst all parties that attended.

I have a SubChapter S Corp, not an LLC. I also have an umbrella policy.

Speaking as someone who has held a dealers license more than once, I kinda like sydways idea better....

Biggest advantages to dealers license come in to play if you like to trade toys often, or have a couple good friends who like to trade and you all go in together. No sales tax and you can drive a new Vette under the same insurance as any old beater.. Plus you can buy/sell at wholesale auctions on the side.

However depending on the state, it's not just a piece of paper. IE; "Ohio" you have to maintain a lot and posted business hours, FL your gonna put up a big cash bond, and so on... So unless your flipping some major hardware every year, the advantages can be outweighed by the responsibilities that comes with holding that license. I dropped mine some years back because other family members hold one if I actually need access.

Now the corporate side can be just as advantageous when done correctly. Good research pays off here. From a business standpoint and boats, advertising on it is one angle, but my father "a financial adviser" just kept a ships log and always had clients / buddies onboard. Amazing how much fuel, beer, and maintenance your clients can legally drink up every year.

for you guys who think an LLC can be created for ONE person. I have a letter from the IRS that shows you must have TWO to make a LLC legit

I tried to attached letter from IRS to a customer of my accountant (He whited out the client info so he could share it) I can not post it here as i no longer am a paying member

Apparently you MUST have at east two partners to make a LLC legit

And this is not the case w/ a Sub Chapter S Corp

True

I am an S corp and have been since the 80's