papogator24
New Member
- Feb 20, 2007
- 639
- Boat Info
- 2007 240DA - Stolen
5.0L Bravo III
3Kw Westerbeke
- Engines
- 5.0L Bravo III
I have a 20 yr loan with BOA for 8.25 from last year. Are you saying that I can deduct the interest for my tax returns?
Question Regarding loans
- Thread starter TimC
- Start date
I have a 20 yr loan with BOA for 8.25 from last year. Are you saying that I can deduct the interest for my tax returns?
Woody
Well-Known Member
Previously you made the comment "keep in mind the interest is tax deductible, so in reality your payment is ~75% of what it really is". Why throw that out when you know it to be untrue? Now you qualify your statement, saying the effect is large in the early months when the interest portion of the payment is large. True, but you just as well could have said the tax effect is near 0 on the last payment where the interest portion is small, both are meaningless to this thread.
Your comment that deductible interest reduces your Gross Income is also incorrect. You actually go as far as telling someone he probably wouldn't qualify for a loan because of his debt ratio. Unless he pm'd you with his life story how would you know.
Your abilities as a tax & financial advisor are lacking. I'll stick by my earlier advice to TimC.
Rich
New Member
- Jan 5, 2008
- 96
- Boat Info
- 270 Amberjack 2005, Raymarine C70, Fishing Package
- Engines
- 350 Mercruiser w/ Bravo III Drives
To all that participated in the rate conversations- Thanks, i will research some of those banks and be certain to push the dealer a bit harder!
Thanks
Thanks
Without saying anything more, here is some reading for you. There's a lot of negativity on this string.
http://seattlepi.nwsource.com/local/199197_boatshome11.html
http://www.discoverboating.com/buying/financing/taxdeduct.aspx
http://www.excelcredit.com/tax_deductible.htm
Hoo'sdave
Member
- Dec 4, 2007
- 241
- Boat Info
- 340 Sundancer Garmin touch screen Garmin HD radar
- Engines
- 454 Mercruiser
Right on Julia Valentine Are you saying that I can deduct the interest for my tax returns.You are 100 percent correct.Right on my new Boston pal .I hope u are not a Red Sox fan.
Woody,
I hope you are not paying taxes on your deductable interest. Boat loan interest on a 280DA is an itemized deduction. Itemized deductions reduce your gross income (total income on line 22 of your 1040) to your taxable income (line 43 of your 1040). You pay tax on your taxable income, not your total income.
I doubt anyone is going to use my or your tax advise without professional consultation. I hope they don't, but I think this exchange has been useful to some.:grin:
bbarquilla@gmail.com
New Member
- Feb 16, 2007
- 51
ok, i will be the voice of reason here....step away from the boating showroom.
You mentioned that your only payments are a truck and rent. If you do not own a home or other assets, I would discourage you from aquiring six figures $$$$ of a DEPRECIATING ASSET.
Do youself a favor and use that money as a downpayment on a home.
I'm sure you don't like that advice, but its only responsible.
flame suit on.
You mentioned that your only payments are a truck and rent. If you do not own a home or other assets, I would discourage you from aquiring six figures $$$$ of a DEPRECIATING ASSET.
Do youself a favor and use that money as a downpayment on a home.
I'm sure you don't like that advice, but its only responsible.
flame suit on.
You work at a local bank don't you?
Woody
Well-Known Member
Thanks for this constructive comment. I was intending to post the same advice but I got sidetracked. Good job.
It's 6:00, I'm checking out of the think tank, cracking open a beer and chillin with my new friend.:thumbsup:
Weave
New Member
Boat loan interest is deductable?????????
Woody
Well-Known Member
We differ only in terminology on this last point. I agree, I hope there is something of use here. To answer your last question: no I don't pay taxes on deductible interest, I don't pay interest. Enjoy your beer.
Let's all calm down.
First, there are several LARGE pitfalls in the boat-is-tax-deductible scheme.
(1) Depends on the boat. Boat must be livable, and have both a Head and a Galley. Not sure a 240DA qualifies, but 280DA might.
(2) Depending upon income, and politics, you may not be able to deduct interest *forever*. If you can afford a boat, that implies that your income may eventually rise to to the point where AMT makes further deductions meaningless. If I took out a larger loan on my house, I can tell you that I would not see my taxes go down ONE CENT because of AMT issues. And yes. . . interest payments do go down over time.
(3) One quick rewrite of the tax code, and kiss that second home deduction *GOODBYE*. Get a democrat in the white house, with democrats in congress. . .I give that deduction a 50% chance to live two years. The Republican Huckabee wants a flat tax. (which means *no deductions*) Remember, people want to make the income tax changes of Bush permanent. People want to fix the AMT problem. The next president may understand Economics 101 (unlike the current administration) -> If you fix these things, you may have other taxes change.
This may not be an issue today. . since the boat is your only deduction. . but in five years when you have a house and twice the income. . .this might be a real issue.
- - - - - -- -
And yes. . .DUDE. . .this is a BOAT. It is NOT an investment. It is a TOY. Worse than buying a car. Even in today's HORRIBLE housing market, you are better off with a house than a boat. Even though the housing market is PLUMMETTING, a house you buy today WILL NOT DEPRECIATE FASTER THAN A BOAT. Especially a new boat!
Do you know why they want you to have assets other than a boat? Because they *do not want you to default*. If you have no assets and the boat sinks -> then you will logically default on the loan and let them clean up the mess. But if you own a house, or other assets, then they can (and will) sue your butt and go after your other assets. Bankruptcy is not the easy thing it once was.
And this scenerio plays out not just if the boat sinks. In three years, you are more than likely to be "upside down" on the loan. You will owe significantly more than the boat is worth. At that point you could easily say "Heck with this. . .let them take the boat!". if you have no other assets for them to go after, then they are out alot of money.
Bankers can be stupid. . which is why we now have a financial "issue" in this country. Bankers are rapidly figuring out that you can't pass the buck on risks. . and you shouldn't let someone else pass the risk onto you. If I was looking at your application, with no assets, there aint' no way I would give you a "low" rate for a risky loan like that.
First, there are several LARGE pitfalls in the boat-is-tax-deductible scheme.
(1) Depends on the boat. Boat must be livable, and have both a Head and a Galley. Not sure a 240DA qualifies, but 280DA might.
(2) Depending upon income, and politics, you may not be able to deduct interest *forever*. If you can afford a boat, that implies that your income may eventually rise to to the point where AMT makes further deductions meaningless. If I took out a larger loan on my house, I can tell you that I would not see my taxes go down ONE CENT because of AMT issues. And yes. . . interest payments do go down over time.
(3) One quick rewrite of the tax code, and kiss that second home deduction *GOODBYE*. Get a democrat in the white house, with democrats in congress. . .I give that deduction a 50% chance to live two years. The Republican Huckabee wants a flat tax. (which means *no deductions*) Remember, people want to make the income tax changes of Bush permanent. People want to fix the AMT problem. The next president may understand Economics 101 (unlike the current administration) -> If you fix these things, you may have other taxes change.
This may not be an issue today. . since the boat is your only deduction. . but in five years when you have a house and twice the income. . .this might be a real issue.
- - - - - -- -
And yes. . .DUDE. . .this is a BOAT. It is NOT an investment. It is a TOY. Worse than buying a car. Even in today's HORRIBLE housing market, you are better off with a house than a boat. Even though the housing market is PLUMMETTING, a house you buy today WILL NOT DEPRECIATE FASTER THAN A BOAT. Especially a new boat!
Do you know why they want you to have assets other than a boat? Because they *do not want you to default*. If you have no assets and the boat sinks -> then you will logically default on the loan and let them clean up the mess. But if you own a house, or other assets, then they can (and will) sue your butt and go after your other assets. Bankruptcy is not the easy thing it once was.
And this scenerio plays out not just if the boat sinks. In three years, you are more than likely to be "upside down" on the loan. You will owe significantly more than the boat is worth. At that point you could easily say "Heck with this. . .let them take the boat!". if you have no other assets for them to go after, then they are out alot of money.
Bankers can be stupid. . which is why we now have a financial "issue" in this country. Bankers are rapidly figuring out that you can't pass the buck on risks. . and you shouldn't let someone else pass the risk onto you. If I was looking at your application, with no assets, there aint' no way I would give you a "low" rate for a risky loan like that.
Last edited:
papogator24
New Member
- Feb 20, 2007
- 639
- Boat Info
- 2007 240DA - Stolen
5.0L Bravo III
3Kw Westerbeke
- Engines
- 5.0L Bravo III
Oh I see that you must have a permanent residence to be able to deduct your boat as a 2nd residence. I am not a homeowner, I just live at my parents 2nd home which is not under my name. It's paid off and I do not pay rent.
bbarquilla@gmail.com
New Member
- Feb 16, 2007
- 51
haha. No i don't. I didn't think my advice would be popular on a boating forum.
Wow I didn't realize a simple loan question could stir the pot around here so easily.
Woody- It was a question about a boat loan not financial advice I was looking for. You shouldn't take shots at people that are simply trying to answer questions that others ask. I appreciate it but I think I would go to a more qualified person than a boating forum for real financial advice.
I appreciate everybody's concern about what I do with my money (boats depreciate, buy a house etc.) but if I needed somebody to tell me what to do with my money I would have gotten married.
Since I'm still in control of my wallet, love boating, have a very demanding job that I don't think about when I'm at the lake. It may be totally irresponsible but I think I'm still going for the boat!
Woody- It was a question about a boat loan not financial advice I was looking for. You shouldn't take shots at people that are simply trying to answer questions that others ask. I appreciate it but I think I would go to a more qualified person than a boating forum for real financial advice.
I appreciate everybody's concern about what I do with my money (boats depreciate, buy a house etc.) but if I needed somebody to tell me what to do with my money I would have gotten married.
Since I'm still in control of my wallet, love boating, have a very demanding job that I don't think about when I'm at the lake. It may be totally irresponsible but I think I'm still going for the boat!
Where's the popcorn. This is great!
Woody
Well-Known Member
TimC-
I read the post where you referred to things as confusing and signed off with "help me out, I'm very disappointed/confused". The "75% off what it really is" comment was misleading. I feel discussion on assests, interest rates, credit worthiness and obtaining financing somehow fits under the heading of "financial stuff". It seems fair the the advice offered might be called financial. Any posts I made were intended to be helpful not offend.
Having said that let me congradulate you on your future boat and your pursuit of the American Dream.
I read the post where you referred to things as confusing and signed off with "help me out, I'm very disappointed/confused". The "75% off what it really is" comment was misleading. I feel discussion on assests, interest rates, credit worthiness and obtaining financing somehow fits under the heading of "financial stuff". It seems fair the the advice offered might be called financial. Any posts I made were intended to be helpful not offend.
Having said that let me congradulate you on your future boat and your pursuit of the American Dream.
barryg
Member
- Jun 24, 2007
- 966
- Boat Info
- 2005 320 Sundancer, Garmin 5208
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- Twin V-Drives 350 Mags
Tim,
Work can be stressful, life is short, boating is a great escape and joy for a lot of us. Good luck with whatever you decide!
Barry
Work can be stressful, life is short, boating is a great escape and joy for a lot of us. Good luck with whatever you decide!
Barry
- Nov 26, 2006
- 7,628
- Boat Info
- 2008 44 Sedan Bridge
- Engines
- Cummins QSC-500's
Straight Drives
We deducted the interest on our 250 for 6 years at which time I paid the rest off. We now deduct the interest on our 340. It is like only paying 75% of the loan amount, except of course, that I double the principal payment. Each month, I pay the loan amount, and in a separate and distinctly marked payment, I pay a chunk of cash to knock off the principal. That payment will have to increase, as the loan amoritization shows, the amount going to principal each month increases as the amount going to interest each month decreases. To keep up, I have to increase my extra principal payment so my boat will be paid off in 1/2 of the loan time.
The reason interest goes down and principal goes up is that the amount of interest is determined by: Interest rate divided by 365 gives daily interest rate. Amount still owed times the number of days between payments times the interest per day = the amount of interest owed that period (month). The amount of interest subtracted from the agreed-to payment amount is the amount paid to the principal (principal is the amount you are currently borrowing). As the loan ages out, you owe less, so the interest paid goes down and the principal paid goes up.
http://www.bankrate.com/brm/popcalc...=0&txtloanAmount=300,001.00&productList=1_f_5
The table is based on the payment being received in exact monthly increments - the actual loan will be calculated based on the formula above. If a payment gets there 3 days early, the amount of interest paid goes down and the amount of principal paid that month goes up.
Clark Howard tells people who have credit card debt to pay 1/2 of the payment 2 weeks early, and the other 1/2 on time. You will pay off your debt in 1/2 of the time.
You may be able to write off your boat even if you do not own a house. Seek professional advice. Follow the law. Take advantage of the law as it is written. Don't feel guilty, just follow the rules. Many people live in Florida 185 days a year, and in Michigan (or other northern state) for 180 days. That way, they can claim Fl as their primary residence and be subject to Fl income tax (zero). It is the law.
The reason interest goes down and principal goes up is that the amount of interest is determined by: Interest rate divided by 365 gives daily interest rate. Amount still owed times the number of days between payments times the interest per day = the amount of interest owed that period (month). The amount of interest subtracted from the agreed-to payment amount is the amount paid to the principal (principal is the amount you are currently borrowing). As the loan ages out, you owe less, so the interest paid goes down and the principal paid goes up.
http://www.bankrate.com/brm/popcalc...=0&txtloanAmount=300,001.00&productList=1_f_5
The table is based on the payment being received in exact monthly increments - the actual loan will be calculated based on the formula above. If a payment gets there 3 days early, the amount of interest paid goes down and the amount of principal paid that month goes up.
Clark Howard tells people who have credit card debt to pay 1/2 of the payment 2 weeks early, and the other 1/2 on time. You will pay off your debt in 1/2 of the time.
You may be able to write off your boat even if you do not own a house. Seek professional advice. Follow the law. Take advantage of the law as it is written. Don't feel guilty, just follow the rules. Many people live in Florida 185 days a year, and in Michigan (or other northern state) for 180 days. That way, they can claim Fl as their primary residence and be subject to Fl income tax (zero). It is the law.
