5 Tax Breaks From Your Boat to Your Pocket
You can’t deny the allure of boat ownership: fishing, water skiing, and social day trips with family and friends. There is a kernel of truth, however, to the old saying that boats are “holes in water that you throw money into.” But if you take advantage of the tax breaks available to boat owners, you can hang onto some of your money, making your boat even more enjoyable to own. Here are five tax breaks to help you stay afloat this tax season.
1. Declaring Your Boat as a Second Home
Deducting the interest you pay on your boat loan by declaring the boat your second home is the biggest tax deduction there is for recreational boating. All you need to have on your boat to qualify is a sleeping place, cooking facilities, and a toilet (portable ones count). If you rent your boat out to others, you need to stay on it for at least 14 nights out of the year, or 10 percent of the number of days the boat was rented.
2. Entertaining Clients
You must be careful with this deduction, because it’s probably one of the most abused tax deductions there is: mixing business with pleasure. You must be able to prove to the IRS that you are doing business on your boat. Keep records of client names, the reason for the outings, their locations and dates, what your expenses were, and expected benefits of the meetings. You can deduct up to 50 percent of the costs of fuel, food, drinks, mooring fees, and tournament entry fees.
3. Using Your Boat to Make Money
If you are earning income off of your boat, for fishing trip charters or sightseeing tours, you need to report that income to the IRS. But you can also deduct all of your business expenses as long as you’re trying to make a profit from the boat and are not using it as a hobby. You can deduct boat depreciation, maintenance fees, fuel, mooring costs, and any equipment you need to buy.
4. Deducting the Sales Tax You Pay
If you live in one of the states that doesn’t tax on income and purchased a boat in the past year, itemize your sales tax deductions. Save your boat’s receipt to prove that the pretty penny you shelled out for your craft was legitimate.
5. Donating Your Boat
If you are in the market for a new boat, or if you’re done being a boat owner, consider donating your boat to charity. The IRS allows you to deduct the market value of your boat on the day you donate it (not what you originally paid for it). You can find out the fair market value of your boat by using an appraisal guide, such as BUCValu. Stipulations exist that determine how much you can deduct, however; these stipulations are based on what the charity does with the boat after donation, so be sure to read the fine print.
As you can see, boat ownership can be both entertaining and tax-deductible. You don’t want to be left adrift this tax season.