Second Home Boat

With end of year tax planning imminent or in progress, it's an appropriate time to offer a reminder that mortgage interest on second homes is tax deductible and a boat can easily qualify as a second home. According to the Internal Revenue Service Publication 936, a boat qualifies as a second home if it has sleeping, cooking, and toilet facilities. Since cooking facilities could be met with a propane stove and toilet facilities could be a portable potty, the requirements are fairly loose. And boat builders know to install the appropriate facilities even in smaller vessels (19 to 25 ft.), correctly supplying a marketplace populated with buyers looking for a tax deduction. About one-half million pleasure boats in the U.S. are considered large enough to be classified as second home boats, according to the National Marine Manufacturers Association.

In addition to the deduction for interest on the boat loan, state and local license fees can also be deducted. Adding the tax benefits together can allow an individual to drop into a lower tax bracket. For example, David Reitze, a Tacoma mortgage broker, was able to see his income tax bracket lowered to 32% from 36% after buying a boat as a second home.

In closing, there is one other IRS requirement regarding boats as second homes which also must be met. The owner must have evidence that he stays overnight on the boat at least 14 days a year. This last requirement shouldn't be hard to meet since it doesn't appear as though the boat has to be near water. The owner could sleep overnight while it was parked in the garage.