The following article provided by boat-financing experts Sterling Associates (a BoatingLocal sponsor) points out a timely potential tax benefit of boat financing over other payment methods. Long story short: Certain boats may qualify as second homes, meaning that the interest can be deducted.
Here’s the long (and technical) version:
Under IRC section 163 (h)(2) a taxpayer may currently deduct any qualified interest on a qualified residence, which is defined as a principal residence and 1 other residence owned by the taxpayer for the purpose of deductibility for the tax year. IRC section 163(h)(3) defines qualified residence interest as any interest that is paid or accrued during the tax year on acquisition or home equity indebtedness with respect to any qualified residence of the taxpayer.
In accordance with IRC section 163(h)(4), a boat will be considered a qualified residence if it is 1 of the 2 residences chosen by the taxpayer for purposes of deductibility in the tax year as long as it provides basic living accommodations such as sleeping space (berth), a toilet (head), and cooking facilities (galley). If the boat is chartered, the taxpayer will have to use the boat for personal purposes for either more than 14 days or 10% of the number of days during the year the boat was actually rented, in accordance with IRC section 280A(d)(1).
Form 1098 is not necessary in order to receive the qualified interest deduction. In accordance with IRS instructions for Schedule A, form 1040, if the taxpayer does not receive form 1098, deductible mortgage interest should be reported in line 11 instead of line 10 on Schedule A.
For more information on second home qualifications or to get the latest rates CLICK HERE.
- Sterling Associates
- New England / 508.234.1550
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