Boating is one expensive recreation! Owners have to figure their costs include insurance, gas, storage, general maintenance, fire extinguishers, life jackets, and a tow package. Oh yeah! Don’t forget to count the costs associated with outfitting yourself and your family in the most stylish swimwear to make you all the rave at the sandbar.
It’s nice to know there is a little break from the feds.
Recreational boat owners who paid state sales taxes on a boat purchase, or those who secured a loan to finance a boat, may have some tax deductions available when filing their 2009 federal income tax return.
The Sales Tax Deduction
For boat owners who paid substantial state sales taxes on a new or used boat purchase last year, the Tax Extenders Act of 2008 continues to offer a federal tax deduction for state sales taxes. Boaters must choose either the state sales tax deduction or state income tax deduction on their federal tax return—you cannot take both.
In addition, to take the state sales tax deduction, the sales tax on a boat purchase must be applied at the same tax rate as the state’s general sales tax. In order to claim the sales tax deduction, tax returns must be itemized.
The Boat Loan Deduction
For those 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, a head, and sleeping berth.
For those who fall under the Alternative Minimum Tax, most deductions are unavailable as taxes are calculated differently. Boaters are urged to contact a tax preparer or financial advisor for more information.
For more details on the mortgage deduction, go to http://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?