Tax Advantages of Living on a Boat
In a previous article, we went over the types of taxes boat owners typically pay, even when they are living on their vessels. We discussed how boat owners can avoid paying property taxes and, in some cases, avoid paying personal property taxes. There are multiple tax advantages of living on a boat, one of the most important ones being deductions on your tax bill. If you are planning to live on your yacht, it is good to be familiar with the most common tax deductions for boat owners.
Common Tax Deductions for Boat Owners
Boat As A Second Home Tax Deduction – This is the biggest tax deduction for recreational boat owners. To get this tax break, deduct the interest you pay on your boat loan in your IRS Form 1098 by declaring your boat as your second home. To qualify as a second home for federal tax purposes, the vessel has to have a bathroom (head), bed, and a kitchen (galley).
Boat As A Primary Residence Tax Benefit – Owners who live on their boats can claim their boat as a primary residence. Similar to a home on land, they will revive all the tax benefits that come with that designation. To qualify, the IRS will have to check your vessel has bedrooms, a bathroom, and a kitchen as well as confirm you are truly living there. To have you boat considered as your primary home, you can have your mail addressed to your vessel, you can list you boat as the address on your driver’s license, and you can have you tax returns mailed to your vessel.
Boat As A Business Tax Deduction – If you work from your boat, you may qualify for a home office deduction. More commonly, boat owners deduct entertainment expenses if they entertained clients on their boats. The limit of the entertainment expense deduction is 50 percent of the costs associated with the yachting excursion which can include fuels, food, drinks, mooring fees, and other expenses. When it comes to taxes, boat owners must be careful mixing business with pleasure. You must be able to prove to the IRS you were doing business on your boat by keeping records of client names, location, dates, and all professional discussions that occurred on the vessel.
Yacht Management South Florida, Inc. is yacht management company with our own full-service boatyard in Fort Lauderdale, FL. Our team of yacht managers and technicians work together to ensure complete yacht care and stress-free yacht ownership to all our clients. Send us a message or call (954) 941-6447 today to learn more about our reasonably priced services.