Do Boat Loans Offer Tax Deductions?
Boat loans are extremely similar types of loans to automobile loans and house mortgages. However, they are usually more challenging to elicit, depending on the financial institution. They also usually require a better credit score, primarily due to the perceived instability of the boating industry. Depending on your financial situation and the type of boat you have selected, you may be eligible for certain tax deductions based on your boat loan. Find out more on how to determine whether you will be eligible for tax deductions below.
Boats as Second Homes for Boat Loan Tax Deductions
One of the most common ways to get a tax deduction on your boat loan is for your boat to be written off as a second home. To achieve this, there are specific requirements that your boat must meet. It is notable that your boat only qualifies as a second home if you have a sleeping berth, as well as cooking and toilet facilities. Luckily, most boats today already come with berths and toilet facilities, so the only thing you need to ensure is included are the proper cooking facilities. If your boat has a gallery, a head, and somewhere where you can sleep, then your boat is in good shape in terms of its eligibility for a tax deduction. However, keep in mind that you can only write off one second home for tax deductions. If you have a mountain cabin or a beach cottage somewhere, then you must choose one. You can alternate between each “second home” yearly if you would prefer to. Once you have stabilized your position, the next step is to ask the lender with your boat loan for IRS form 1098 to file your report. A letter from your lender would also suffice.
There are additional alternatives you can use to attain a tax deduction on your loan. Many boaters use their trusty vessel to entertain business clients. If this circumstance is pertinent to your lifestyle, then you may be able to file for a tax deduction under the entertainment expense category for your business. You should be warned that the IRS scrutinizes this method thoroughly because many people abuse this method. These alternatives are based on your financial situation and the boat type you possess. To understand whether these types of deductions are applicable to you, we recommend that you contact your boat loan broker or boat loan lender to assist you. Lastly, if you would like to see our boats for sale, click here!