[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]Owning a boat has numerous benefits including soaking up the sunshine and spending time in the great outdoors, engaging in watersports, seeing beautiful landscapes, and visiting places that you can only access with a boat. There are so many mental, physical, and emotional benefits of owning a boat.
Additionally, investing in a boat can provide financial benefits especially if the boat is a business such as a charter business, a deep sea fishing operation, or if you offer scenic sunset cruises or sightseeing trips to passengers.
But, what most people don’t know is that there can also be boat loan tax benefits. This can make boat ownership more appealing and more affordable to borrowers who use a boat loan to finance a boat or a yacht. It can also be more advantageous to get a boat loan instead of paying cash for the boat because of the boat loan tax benefits.
Keep in mind that it’s always best to consult with a CPA (Certified Public Accountant) if you have specific questions and also refer to the IRS for up to date tax code information.
If you want to take advantage of boat loan tax benefits, then look no further than Trident Funding. This marine specialist has been helping borrowers get the best boat loan terms, rates, and loan products for more than thirty years. They operate a boutique style business with individual attention going towards each and every customer. There are small professionally staffed offices throughout the country as well as a team of marine loan specialists that you can contact over the phone.
You can apply for a loan online and use a boat loan calculator to calculate your approximate monthly payment. There is even a free rate estimator tool so you can check out current boat loan interest rates and what rate you potentially qualify for based on your credit score and the age of the boat.
Boat Loan Tax Deductions: What You Need to Know
Is a boat loan tax deductible? And is boat loan interest tax deductible? These are common questions when borrowers are in the market to buy a boat. The answer is that it really depends. In the U.S., you can deduct the interest you pay on your home mortgage loan on your federal income taxes, and you may also be able to deduct a portion of the points you pay to secure the loan. These points are paid up front and are typically a percentage of the loan. You typically pay them in exchange for a lower interest rate or if you otherwise wouldn’t qualify for the loan due to a lower credit score.
According to the IRS, in addition to deducting interest on your primary residence, your first home, you can also deduct mortgage interest on a second home. This ‘home’ must meet certain criteria in order to qualify. It can in fact be a boat or another type of non traditional home.
The following qualifications need to be met in order to have your boat be considered a second home and therefore subject to tax deductions:
- You can only use one second home per year for interest tax deductions even if you have more than two homes
- You don’t have to use your home during the year if you don’t rent it out to others
- If you do rent out your home to others, then you must use it yourself more than 14 days out of the year or more than 10% of the number of days that it is rented at fair market rental value; whichever is longer. For example, if you rent your home at fair rental value for 200 days per year, then you must use it as a second home for at least 20 days per year.
- The boat needs to have basic living accommodations to be considered a qualifiable second home. These include a sleeping area such as a cabin or a berth, a cooking area such as a kitchen and a bathroom with a toilet, sink, and a head (shower).
There are different requirements that need to be met if your boat is being built, is under construction, and will be your second home. Additionally, if your boat was used as your second home and was destroyed there are some exceptions. If part of your boat is used as your second home and the remainder is used for something else, then you would need to calculate the divided use of your home.
Keep in mind that taxpayers filing as married and those filing separately need to follow specific filing guidelines. If you’re married and filing jointly, your second home can qualify if it’s owned by one or both spouses.
Boats that would potentially qualify for boat loan tax benefits include:
- Yachts
- Cabin cruisers
- Convertible fishing boat
Boats such as deck boats, pontoon boats, jet boats, and speed boats typically won’t qualify for boat loan tax deductions unless they’re being used for business purposes.
Boat Tax Deductions: For Businesses
In addition to possibly being able to write off your boat loan interest on your boat that is used as a second home, you may also be able to write off some of the expenses associated with owning a boat that is used for business purposes.
Some examples of using your boat as a business include:
- Charter boat businesses
- Using your boat to commute
- Using your boat as a home office
- Using your boat to entertain clients for your business
Each type of business use has its own guidelines in terms of what can be written off and what doesn’t qualify. For example, if you have a charter business, you can write off fuel expenses, maintenance, docking costs, and boat related equipment purchases. Keep in mind that if you also use the same boat for pleasure, you can’t write off any of those expenses during the time it’s not being used as a business. This is why it’s a good idea to keep receipts, a ledger, and have itemized deductions of all of your write offs.
Boat Loan Tax Benefits: The Wrap Up
Boat loan tax benefits and boat loan tax deductions can be a complex subject best assessed by qualified professionals such as accountants and maritime tax attorneys. Just because you have a boat loan doesn’t mean that you automatically get a federal tax reduction. But in the same instance, you don’t want to miss out on boat loan tax benefits if you do qualify.
Generally, you can take advantage of boat loan tax benefits if your boat meets the requirements to be considered a second home or if you use your boat as a business.
Frequently Asked Questions: Boat Loan Tax Benefits
Can You Buy a Boat as a Tax Write Off?
You can buy a boat as a tax write off if it’s going to be used as a business such as a charter business or for fishing expeditions or island hopping. In these cases, a percentage of business related expenses can be written off. Examples include maintenance, fuel, and equipment purchases.
You can also deduct interest paid on your boat loan if it meets the qualifications to be considered a second home. It must have sleeping quarters, a kitchen, and a full bathroom.
Remember to do your research before buying a boat because not all boats will qualify as tax write offs. Buy it for your enjoyment and consider the tax benefits as an extra bonus.
If you’re in the market for a new or used boat or yacht, and want to take advantage of the tax benefits associated with a boat loan, reach out to the marine financing industry leader, Trident Funding. They will ensure you get the most competitive rates and terms and they make the entire boat loan process smooth sailing from start to finish.
Do You Get a 1098 for a Boat Loan?
A 1098 is an IRS form used by mortgage lenders to report mortgage interest paid to them by borrowers. It can also be used by marine lenders for interest paid on boat loans as well as charitable contributions of motor vehicles, airplanes, and student loan interest payments.
There are multiple different versions and updates of this form but they all basically are used to report certain tax-deductible expenses to the IRS and to taxpayers. If $600 or more is paid in interest during the year, then the lender must fill out this form and send it to the borrower (taxpayer) and the IRS.
However, a 1098 form isn’t always sent out by marine lenders, so borrowers are sometimes unaware of tax deductions that they may qualify for. Even if you don’t receive a 1098, you can still qualify for boat loan tax deductions. Find out how much interest you paid over the course of the year and report it on your taxes. You can typically call your lender for this information or go to your online portal if your loan is managed online. [/vc_column_text][/vc_column][/vc_row]
