When it’s time to pay taxes, taxpayers often try to find legal ways to reduce the bill. One way you can offset your taxes and get a tax deduction is to declare a boat on your taxes. Depending on how the boat is used, the interest used to pay the boat can be written off on your taxes.
Here’s what you need to know on how to use a boat as a tax deduction.
- Keep all receipts and loan documents at hand. When it comes to paying taxes, it’s important to have your documentation ready. This means that you should be able to produce any bank loan statements and receipts pertaining to the sale, use and maintenance of the boat. This will help your tax preparer identify what can and can’t be deducted on your taxes.
- Determine the use of the boat. Before you can declare the boat as a tax deduction, you need to first assess how the boat is used. If you sleep in the boat and stay in it a considerable amount of time, you may be able to declare it as a residence. If this is the case, you may be able to deduct the interest used to pay off the boat on your taxes. If it is a recreational vehicle, you may not be used to write it off. However, if you are using the boat as part of your business, then you will be able to write off specific deductions.
- Assess if the boat is used as a secondary residence. To qualify as a residence, you must spend at least two weeks out of the entire year in the boat. You need to be able to show proof of this. Also, your boat must meet certain requirements. It must have an area for sleeping as well as a bathroom. There should also be a cooking area with a sink.
- Declare the cost of the boat as an accelerated depreciation. If you purchased the boat under your business, then you can write off half the cost of the boat as an accelerated depreciation. This means that in the first year of ownership, you are already declaring the anticipated depreciation value of the boat.
- Purchase the boat under the corporate account. You have more tax deduction options as a business owner than as a private citizen. For example, you may choose to buy the boat and have it owned as a corporate piece of property. However, you need to be able to show that you conduct business on your boat. For example, if you hold meetings on your boat, or if you take your employees for some recreation time on the boat as a means of compensation, you may be able to write of the use of the boat as a deduction. You may also use the boat to ferry people or provide tours.
It’s best to work with a professional tax attorney or an accountant
specializing in these types of things if you want to write off a boat as