writing the boat off

bigblockcutlass

bigblockcutlass

Member
May 9, 2010
832
Michigan
Boat Info
1998 Carver 370 Voyager
1990 270 sea ray sundancer twin 4.3L
1987 Power Play 230 Conquest
1987 Fo
Engines
454
What most people do to write there boat off? Looking to buy a larger boat, cost are high so looking for ways to write it off.
 
You can easily write-off the interest you pay on a loan if you finance the boat so long as it meets IRS requirements. I think that's as easy as having a galley and a crapper.

If you're looking to deduct the actual purchase of the boat and you're not a business owner I'm not sure you can get there...
 
Many are obfuscating and hoping not to be audited.Seek real legal and tax advice from qualified professionals before you go too far down this road.

Of course it depends on size of vessel and it's intended use, how you hold title (personally or LLC) and what type of business use you foresee. Are you willing to bareboat your prized yacht? Are you licensed to carry passengers for hire, or do you have a budget to hire a captain? Do you actually plan to run this as a going business, or will you accumulate years of losses that the IRS will ultimately deem to be a hobby thereby disqualifying the deductions? Don't overlook insurance and financing cost/complications as well.

i knew a guy who became a yacht broker to avoid paying sales tax on his boat, but he ended up in a long court battle with his bank accounts frozen for state tax liens.

There are lots of schemes, but few success stories in the 25'-75' size range. In certain geographic areas, commercial sportfishing boats in this size range come close to providing low cost (but high risk) use for their owners. But those owners also give up most of their prime time aboard for that privilege. I used to run a sailing school that had hundred of small <20' sailboats in a rental fleet. It's been a sustainable business for decades, but it's a business, not just some guy trying to save money. Also, many 75'+ yachts are successfully chartered to help offset costs, but again, at the cost of owner's access to the vessel.

Good luck, and keep us posted with how you proceed.

Jeff
 
I agree with Jeff. This is a complicated question with the end result depending upon your use and whether or not the boat is really a business asset.

Here is an example of a guy in our marina: He owns a company that makes very high end fishing lures.......those cast/molded rubber minnows, worms, etc. He lives in Alabama and keeps his boat on the Gulf Coast. He called the boat a test vehicle for his bait and depreciated the boat as a business asset, and deducted 75% of the interest, depreciation, the fuel, repairs, maintenance, slip rent and insurance....... until he was audited. The IRS disallowed the entire boat deduction but agreed to let him deduct 5% of the costs if he kept records of who was on the boat, when the trips were done, how long they lasted and if he bought fuel before and after each trip.

Had this fellow just gotten advice from competent legal and tax advisors, he would have known that deducting anything past the interest on a qualified boat loan was painting an audit bull's eye on his tax return

The record keeping in order to deduct part of the boat's cost proved not to be worth the hassle, but the real cost of this effort to deduct his boating cost was having his business and personal tax returns audited for the next 5 years.
 
I've been through an audit and trying to write off a boat for business purposes is futile unless the boat is your main source of income such as a charter captain (also see Frank's post above). However, it can qualify as a second home if it has sleeping quarters, a galley and a bathroom. If it qualifies as a second home you can deduct the loan interest BUT....talk to your tax advisor. Don't take tax advice from an online forum.
 
As my tax guy told me years ago........... you can deduct anything you're brave enough to deduct. Just be prepared to pay the man if you get caught. Risk vs. reward. Just remember the consequences can be very bad and very expensive.
 
Steve195 said:
As my tax guy told me years ago........... you can deduct anything you're brave enough to deduct. Just be prepared to pay the man if you get caught.
Click to expand...

What he said! We have a tax attorney we like, and he told us the same. He helped us form an LLC to hold a boat, and I got my OUPV/Master to be a captain for hire. We purchased 80' of prime dock space under the LLC. We planned to offset regular income with the purchase of a boat, then run it as a business.

In the end, we decided it wasn't worth the trouble. The liability is high, as anybody will sue anybody for anything these days. As such, insurance costs were looking expensive. By the time I would go through voluntary CG inspections as an "uninspected vessel" and try to find customers, I'd be better of spending time with my family and working my day job a little extra.

There are some success stories out there. If you entertain for business, for example, you may have a good write-off. In any case, find a good tax guy who will also represent you in a battle.
 
What if you purchase a boat for your only home, is there a write off? Also i will be paying cash.
 
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Not sure if this is correct. Turn your boat over to a company that rents boats. Select your time you want to use it. Pay full amount for your use. Rent it out as much as possible. Declare all the moneys received as income then deduct the cost to own and operate the boat. You should be able to deduct the Capital Cost Allowance. If your cost exceed your income you land up with a deduction if not you make money and in 5 years you get a new boat and start again.
 
bigblockcutlass said:
Looking to buy a larger boat, cost are high so looking for ways to write it off.
Click to expand...

I'm not sure you understand the definition of a "tax write-off." This doesn't actually make the boat any more affordable for you; it simply lowers your tax liability. If the cost of a larger boat is a barrier to entry, no amount of tax write offs are going to make that boat suddenly affordable.
 
This applies to WA State Sales Tax and likely other states: If you purchase a boat that is owned under an LLC you pay no sales tax on the boat.

I checked with the WA Dept of Revenue when I bought Beachcomber. Their reasoning is that when you buy an LLC you are buying it with all of its assets. Normally that refers to office equipment, vehicles, etc. I specifically asked the person I was talking with about boats and they assured me that ALL assets of the LLC are transferred without additional sales tax.

He said that the title to the boat/truck/cars is not being transferred. It remains in the name of the LLC.
 
It just isn't worth the trouble from what I'm reading. Captain licence, High insurance, Dealing with the few customers you do have. It would be nice to justify wasting so much money. Then if you do this, it puts a target on your back with the IRS.
 
Z-Worthy said:
I'm not sure you understand the definition of a "tax write-off." This doesn't actually make the boat any more affordable for you; it simply lowers your tax liability. If the cost of a larger boat is a barrier to entry, no amount of tax write offs are going to make that boat suddenly affordable.
Click to expand...

Hmmm....if I somehow reduce my annual tax liability directly as a result of "something" it certainly is going to make that "something" more affordable, ie, I will have more money in my pocket on an annual basis vs not having reduced the tax liability.

My home is certainly more affordable (for me, the lowly person not paying cash for everything) directly as a result of the tax benefit I receive by "writing off" or itemizing as a deduction if you prefer, the interest I pay on the mortgage as well as the property taxes I pay.

It would be silly to suggest a tax benefit doesn't make something more affordable...unless you pay no taxes.
 
...If you take more than the interest deduction as a second home, make certain that the IRS agrees you've got a business and not a hobby.
 
I always loved it when I had my contracting business . All I heard was "do this, you can write it off", "buy that because you can write it off". My reply was always "I still have to buy it!
 
Take it from some one who has been audited, it's not worth the aggravation. Talk to any accountant, and they'll tell you the same, (if reputable of course).
 
SloBurn said:
Take it from some one who has been audited, it's not worth the aggravation. Talk to any accountant, and they'll tell you the same, (if reputable of course).
Click to expand...

Amen! Been through it too and it's worse than a root canal without anesthesia. Talk to your accountant and, if he/she thinks you have legit deduction, be sure they are willing to defend it with the IRS -- and ask them if they will pay the penalty if the IRS disagrees. My guess is they will not put their money where their mouth is.
 
According to my accountant, you're only allowed to use the intrest on the loan. She and I have talked about this many times.
 
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