Tax Tip: Boat Owners May Have Federal Tax Deductions Available

• PilotMedia writes: For boat owners with a secured boat loan, mortgage interest paid on the loan may be deducted from your federal income taxes. Taxpayers may use the home mortgage interest deduction for one second home in addition to their primary home, and must itemize deductions on their returns. A boat is considered a second home for federal tax purposes if it has a galley, an installed head and sleeping berth.
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• Some members of Congress have sought to eliminate this deduction for boat owners while keeping it in place for second home and recreational vehicle owners. BoatUS lobbied aggressively for a more equitable all-or-nothing approach when applying the deduction, and boaters did not get unfairly singled out.
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• 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.
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• For those who fall under the Alternative Minimum Tax, most deductions are unavailable. Boaters are urged to contact a tax preparer or financial advisor for more information.
• For more details on the mortgage deduction on boats that qualify, go to www.IRS.gov and download Publication 936 or the Fact Sheets. For state tax deduction information, download Publication 600 which also includes state-by-state tax tables.