NEWS AND NOTES
Blue Water Sailing
February 19, 2009
Tax benefits of owning a boat
Turns out owning a boat can actually be a benefit during tax time. Usually as boaters we are spending money on our boats and moorage but once a year it can pay us instead in the form of reduced taxes.
One of the tax breaks is the sales tax deduction which was extended through 2009. Recreational boat owners who paid state sales taxes on a boat purchase, or those who secured a bank loan to finance a boat, may have some tax deductions available when filing their 2008 federal income tax return. Residents of other states can choose to deduct their state income tax or claim the state sales tax deduction.
The Sales Tax Deduction
In order to claim this deduction returns must be itemized. The state sales tax is entered on IRS Schedule A, line 5b.
The other tax deduction is available to those who have a boat loan. Your boat may be treated like a second home for federal tax purposes if it has a galley, a head, and a sleeping berth. If you haven’t received the form contact your lending institution as not all lenders send out Internal Revenue Service form 1098 which reports the interest paid for the year. Publication 936 provides additional information on Home Mortgage Interest Deductions.
The Boat Loan Deduction
For those owners with a secured boat loan, mortgage interest paid on the loan may be deductible from your federal income taxes. Taxpayers may use the "second home" mortgage interest deduction for one primary home and one second home and must itemize deductions on their returns. A boat is considered a second home for federal tax purposes if it has a galley, a head, and sleeping berth.
Some boaters may be unaware of this potential tax benefit, because not all lending institutions send borrowers an Internal Revenue Service form 1098 which reports the interest paid. Not receiving the form does not preclude taking the deduction. If a 1098 is not available, boaters should contact their lender for the amount of interest paid and should enter it on line 11 on Schedule A along with the lender's tax ID number. If a form 1098 is sent, boaters should simply enter the amount on line 10 of Schedule A.
For further details go to IRS.gov or consult your tax adviser. Getting a tax break is just one more reason to justify owning a boat. From: www.examiner.com and www.bymnews.com.
