Deducting interest for a second (boat) home

just remember you'll have to get you own copy of the year-end interest paid to submit with your return since this is not an IRS reporting loan (ie., you wont get a 1099int). And don't forget the 14 day stay requirement.
 
I have been doing it since we owned eligible boats (cuddies and cruisers). Right now it is not much help anymore since we have hit the AMT hurdle and lots of deductions don't grip anymore ...
 
I guess I should talk to my bank....I'm getting confused on this: If I take a home equity loan, can I still deduct the interest on that if I use it to buy a qualified boat?
Or does it have to be a "boat loan" secured only by the lien on the boat?
If it is the latter, I assume the interest would be much higher than a standard home equity loan and then wonder if the interest savings from an equity loan would offset the tax deduction from a higher boat loan.
It would be interesting to crunch some numbers...
 
rhodyboater said:
I guess I should talk to my bank....I'm getting confused on this: If I take a home equity loan, can I still deduct the interest on that if I use it to buy a qualified boat?
Or does it have to be a "boat loan" secured only by the lien on the boat?
If it is the latter, I assume the interest would be much higher than a standard home equity loan and then wonder if the interest savings from an equity loan would offset the tax deduction from a higher boat loan.
It would be interesting to crunch some numbers...
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Can't deduct it twice. So one or the other. I couldn't say which one is more lucrative for you. As mentioned above, that's a question best asked of your accountant. But, you're correct in your assumption that there will eventually be a "break even" point between the two loans, depending on interest rate.
 
The tax code regs say nothing about a 14 day stay requirement nor do they "define" a head as excluding a porta potty. At least that was the case last I read it. They are left up to interpretation like basically every law. I'm sure some people will define them differently.
 
A home equity loan is tax deductible and I have never heard of anyone being questioned what he/she did with the loan money. Beware the HELOC. Do a loan instead of a line if you can. The amortization on a line of credit is has you paying interest ONLY for a long time before you start chipping away at the principle. Just remember that if you can't make payments, they will take your house, not your boat.

You could also do a re-fi on your home mortgage and if you have enough equity in your home, borrow more than your current mtge and use the extra $ to buy your boat. Isn't it great how many creative ways exist to get buried in debt even further?!
 
Cincy Aquaholic said:
The tax code regs say nothing about a 14 day stay requirement nor do they "define" a head as excluding a porta potty. At least that was the case last I read it. They are left up to interpretation like basically every law. I'm sure some people will define them differently.
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"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)."

That being said.... I believe that IRS defines residence "facilities" as fixed installations and part of the "permanent structure". In an audit, they WILL argue that a "sleeping blanket", "camping grill" and porta-potty does not apply. : )

If you have two out of the three, then maybe you could argue that a porta-potty does apply, and I bet that it's really dependent upon the auditing agent at that time.
 
What's interesting is that these deductions were taken for YEARS w/o question from the IRS. However, since our government is on an unprecedented spending spree with no end in sight, I would imagine that all of these overlooked little things that we've all been getting away with for years will start being enforced as the IRS is instructed to collect every penny they can. I wouldn't be surprised if this President looks to take away more and more deductions to support his tax-n-spend habits. This is not a political statement - it's what I see in our future. Someone is going to have to pay for all this stuff at some point, and that "someone" is the taxpayer.
 
MExcelsior said:
"In accordance with IRC section 163(h)(4), ...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)."...
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The 14 day rule only applies if the boat is chartered.
 
jabs said:
Can slip fees be written off as property taxes if the boat falls under the second home?
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No because they are rent. Just like you can not deduct condo fees. In a similiar vain garbarge collection that is included in your property taxes is deductible, but if you pay it seperately it is not deductible.:smt021
 
rondds said:
What's interesting is that these deductions were taken for YEARS w/o question from the IRS. However, since our government is on an unprecedented spending spree with no end in sight, I would imagine that all of these overlooked little things that we've all been getting away with for years will start being enforced as the IRS is instructed to collect every penny they can. I wouldn't be surprised if this President looks to take away more and more deductions to support his tax-n-spend habits. This is not a political statement - it's what I see in our future. Someone is going to have to pay for all this stuff at some point, and that "someone" is the taxpayer.
Click to expand...
I agree with Ron 100%. Enjoy it while you can.
 
Mr Salt said:
No because they are rent. Just like you can not deduct condo fees. In a similiar vain garbarge collection that is included in your property taxes is deductible, but if you pay it seperately it is not deductible.:smt021
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You can potentially write that off if the boat is a charter business as rent, but as a personal asset, slip feels are out of luck. : )
 
rondds said:
A home equity loan is tax deductible and I have never heard of anyone being questioned what he/she did with the loan money. Beware the HELOC. Do a loan instead of a line if you can. The amortization on a line of credit is has you paying interest ONLY for a long time before you start chipping away at the principle...!
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This isn't quite correct. A home equity loan would be the best way to go if you want a locked in interest rate and the same payment each month. This issue is whether the lower interest rate with a home equity loan vs. a boat loan that would also be interest deductible would be worth having a lien against your house for the boat.

A home equity line would give you the same advantages if you don't mind a variable interest rate which on mine is an increment below prime. The minimum payment is 1% of the outstanding balance so the effective interest rate would have to be 12% annually or more to produce an interest only payment. I believe prime is around 3.5% now so with even with a 2% adder you would still be amortizing principal with a 1% of balance payment.

Eventhough my interest cost would have been considerable less after tax with the credit line I chose a boat loan because I did not want the lien against my house and I don't use the credit line for long term financing.
 
320Bob said:
This isn't quite correct. A home equity loan would be the best way to go if you want a locked in interest rate and the same payment each month. This issue is whether the lower interest rate with a home equity loan vs. a boat loan that would also be interest deductible would be worth having a lien against your house for the boat.

A home equity line would give you the same advantages if you don't mind a variable interest rate which on mine is an increment below prime. The minimum payment is 1% of the outstanding balance so the effective interest rate would have to be 12% annually or more to produce an interest only payment. I believe prime is around 3.5% now so with even with a 2% adder you would still be amortizing principal with a 1% of balance payment.

Eventhough my interest cost would have been considerable less after tax with the credit line I chose a boat loan because I did not want the lien against my house and I don't use the credit line for long term financing.
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100% DITTO that! In addition, if you cannot manage to pay interest and principal while you might only be required to pay interest, you should no borrow any money anyway :smt021
 
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