Tax question
 

I'm sure some of you have your boats paid for, but for those of you that have them financed, how many are writing off the intrest paid through the year and if so, how big is your boat? I'm not sure what the guide lines are for this. Could some one shed some light on this?

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I don't finance my boat, but I know from past years experience was if the Boat had a kitchen and a bed it can be considered a second Home and therefore the interest was tax deductable on the Federal level.

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If you can:

1. Cook on it
2. Sleep on it
3. Go to the bathroom on it.

You can claim it as a second residence and deduct the interest.

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Kitchen can be a portable coleman stove.

Bathroom can be a portable potty that you can carry on and off(fully loaded). :D

If you already have mortgages on two homes you cannot write off a thrid.

If you get audited all three better be in line and the first two on board.

Re: Tax question
 

Here's a queston,

My house is in my Fiance's name. I have a boat that is financed that would qualify as a second home. I would think i would need a "first" home to write it off ?? or can i still write it off ??

we will be married in April, so i would think i should start being able to write the boat off as a second home come next tax season?? And do we need to get my name officially on the house note ??

thanks, not very knowlegable on how all this works.

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Better not piss her off, or you won't have to worry about a tax write-off. :eek:

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Like we said before here is what you need:
A pillow
A bic lighter and
A bucket.

and write off the interest.

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Forgot I have a 42.

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Are you guys serious? A Colman stove qualifies as a kitchen? Can someone point me to something in writing so I can show my tax guy. He does not believe me.

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If your tax guy doesn't believe you, then it sounds like you might need a new tax guy.

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That makes a Gladiator a tough one to write off. :D

BUT! Congress just passed that law where those states with out income tax can write off sales tax. Lets see, $22,000 in sales tax paid on the boat alone, I can only hope that does not push me into the AMT.

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I know plenty of people who write off their boat's interest.
So far, only one of them has been audited.
His boat has a porta potty in a "separate potty room" - PASSED that test.
His boat has a cuddy that has a filler cushion that makes into a bed - PASSED that test.
Has a "clamp on" barbecue grill that fastens into a rod holder. Is stored on the boat and is accessible, alone with the propane bottle - PASSED that test.
Boat also has full canvas enclosure. Auditor said that if it had been an "open" boat with no enclosure, that he would have to have disallowed it. Never heard that part before.

I would take whatever advice your tax guy gives you.

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Yup, yup and are you sure? We had a primary residence, a rental property, and we wrote off the boat. The tax guy didn't try and stop us....

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http://www.irs.gov/publications/p936/ar02.html
Scroll down the page, maybe 1/8 of the way. Look for the italics noted "Qualified Home"
Qualified Home
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.

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Now I'm confused. From what I'm reading I have to have an enclosure and a toilet in a seperate room. Does a cuddy and a pump out under a filler cushion cover it?

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Rental property is an investment/income-producing item. Any costs (interest, maintenance, etc.) relating to a piece of investment property are used to offset reportable income. The interest from the rental property is not listed as a personal deduction. It is an offset. Check your 1040's from the years in question. You'll see that it is listed in a different category.

You can have a zillion pieces of rental property with loans on each one, and the interest on them goes into a sheet for each property. And each sheet will return either "reportable income" or "loss" to be factored into your taxable income.

If you have "investment property" with a mortgage on it but it is not being rented, then you must determine whether you want to figure the interest against your cost basis for later calculation of capital gain/loss or if you want to use it as one of your TWO personal mortgage deductions.

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I had never heard of the enclosure thing before. Dunno if that had anything to do with the "cooking device" being "outside" or not.
The crapper doesn't have to be in a separate room, just so happened that HIS was.

Go with whatever your tax guy feels good about. It's generally not a great idea to go against their advice (assuming you use a fairly experienced guy).

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My tax guy is very good. He knows how far to push things before the red flag comes up. He just has not done anything like this before and he is unsure. Hesays he wil do anything I want. Now I'm unsure.............I don't want to risk a big fine or penalty for a lousy few bucks but I want what's coming to me.

Re: Tax question
 

http://www.boatus.com/gov/f3.htm

BoatUS website "loosely" says boat must have a berth, a galley, and a head.
A small cruiser will have NO TROUBLE meeting that description, but a go fast will begin to "stretch" it.
__________________________________________________ ____

http://seattlepi.nwsource.com/local/...atshome11.html

Seattle seems to have a lot of people who go to great lengths to meet the requirements for the deduction.
__________________________________________________ ___

As before, show these to your tax guy, and then heed his recomendation.

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You're absolutely right. It is seperate. I'm looking at an orange and thinking apple. Thanks for straightening me out.

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Anyone know about this ?

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hp 2000 , i belive that your social # would have to be on the mortgage to qualify the boat as a second home.

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hi-perf-2000,
The way I read this is that you could claim it as your second home even if you don't have a mortgage on a first home, I don't think the mortgage status of your first home would have anything to do with your second home. If your first home was paid off and you didn't have a mortgage on it you still should be able to deduct the interest on a second home. Or if you rent your first home why wouldn't you be able to write off the interest on a second home?

I'd go for it if you have a spot to sleep,cook and poop.Pillow, bic lighter and bucket.

Just my$.02
Caleb

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I've never received anything in the mail from any bank from which i have financed a boat from in the past. Do i need to call them and get an intrest statement ?

here's another question.... I just bought this boat in May. My old boat (which would also qualify) was also financed, and i sold that in April. So would i need 2 statements ........ 1 from each bank ?? Or can i only claim the new boat ?

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The tax people I deal with are VERY familiar with this...

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Where do you report the interest on the itemized deduction form?

I recall a blank for interest that was not reported on your 1098, is this the correct place?

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TSSTEPH,

Report the interest on a boat loan the same way or place you report the interest on your primary mtge. Technically you are claiming the Boat Loan as a second residence. Any questions you can call the IRS, they can tell you exactly on your particular situation.

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On your schedule A, line 11."Home mortgage interest not reported to you on Form 1098."

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We claim interest on our boat every year and our tax person never says anything. They do not send out interest paid forms on boats in Ohio, so we call every year to get the interest paid, so if you receive nothing in the mail I would call your bank.

You should be able to claim both boats. If it sold a house last year and bought a new one, you'd claim interest on both (at least we did last year).

Re: Tax question
 

Tax deductibility of interest on yacht loans
Under IRC section 163 (h)(2) a taxpayer may deduct any qualified interest on a qualified residence, which is defined as a principal residence and one other residence owned by the taxpayer for the purpose of deductibility for the tax year. IRC section 163(h)(3) defines qualified residence interest as any interest which is paid or accrued during the tax year on acquisition or home equity indebtedness with respect to any qualified residence of the taxpayer.

In accordance with IRC section 163(h)(4), a boat will be considered a qualified residence if it is one of the two residences chosen by the taxpayer for purposes of deductibility in the tax year as long as it provides basic living accommodations such as sleeping space (berth), a toilet (head), and cooking facilities (galley). If the boat is chartered out, the taxpayer will have to use the boat for personal purposes for either more than 14 days or 10% of the number of days during the year the boat was actually rented, in accordance with IRC section 280A(d)(1).

Form 1098 is not necessary in order to receive the qualified interest deduction. In accordance with IRS instructions for Schedule A, form 1040, if the taxpayer does not receive form 1098, deductible mortgage interest should be reported in line 11 instead of line 10 on Schedule A.

Borrowing against your unencumbered home has limitations
Home mortgage interest deduction is limited to interest paid on mortgage debt used to purchase or improve a residence, or to refinance the remaining balance on a purchase or improvement. If the money isn't used for the home, the interest expense does not qualify for the deduction.

So does a home equity loan
Home mortgage interest deduction is limited to interest paid on home equity loans up to $100,000. By using a home equity loan, you may limit the amount of interest that is deductible, if your boat loan balance exceeds $100,000.

Second home mortgage interest deduction is limited to interest paid on second homes that are secured by that second home. You would need to have a written collateral agreement (security agreement) indicating the boat as collateral.

The preceding information was prepared by Deloitte & Touche, LLP

Re: Tax question
 

We do every year.

Re: Tax question
 

Any advise on paying sales tax on an 1988 pre-owned boat? Say I bought the boat for 50k but I have a bill of sale for 25K? Or
Say I bought the boat for 50K but the seller gave me a bill of sale for 1 dollar, because he was my cousin? Can this be done?
Or do they just go off the book value if bill of sale is less?

Thanks

Re: Tax question
 

Thank God!

Re: Tax question
 

Pretty sure they go off the bill of sale. We used to sell things to friends and do the same thing.


Can you show me this law??? Is it only for certain income brackets? anyone else have more info? Is there a cap?

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This site explains it: http://www.irs.gov/newsroom/article/...133209,00.html

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Yes, give them a call. They used to send out automatically, now last few years you have to request an interest statement. They charge $5! We have Key Bank.

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Anybody know for sure??

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Interesting. We have Key Bank also. We just ask for the amount so we're not charged anything. I take it you're paying $5 for the statement itself? Hmmm, they didn't tell us about that option.

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" Auditor said that if it had been an "open" boat with no enclosure, that he would have to have disallowed it."

I would have called bullsh**t on that. Your boat can be completely open if it meets the above mentioned criteria. I have been audited more than once. Auditors are not always right. Make sure that any info they want is requested in writing. Send only the info requested to your accountants office. Do not talk to him untill after he has met with your accountant. Then only meet face to face with him/her with your accountant present and at his office. If you are asked a question that could be miscronstrued, let your accountant answer for you. It is best to play dumb on most questions and let your accountant do most of the talking. These guys/gals can be quite clever during their interview.

Steve Hixson

Re: Tax question
 

Sales tax varies state to state. Here in MO, you can transfer between "certain" family members with no tax, ie. spouse, parent/child, dont recall cousins though.
Gary