How to Use a Boat as a Tax Deduction

Many personal recreational boats qualify as second homes and the interest paid on those boat loans can be deducted from your taxes. Boats purchased and used for business purposes also come with a few tax deductions. There are some requirements that you and the boat have to meet to take these deductions. Make sure you check them before using your boat as a tax deduction to avoid a tax audit.

Difficulty: Moderate

Instructions

Things You'll Need:

• IRS Tax Form 1098 (if using second home tax deduction)
• Proof of business expenses (corporate and business boats and yachts)

1. Identify the interior boat requirements. To qualify as a second home tax deduction, your boat must have the following: sleeping quarters (this can be as simple as a platform with a mattress), bathroom facilities (at least a port-a-potty), cooking facilities and a sink.

2. Recognize your time requirements. You must stay overnight on your boat at least a total of two weeks during the year to use it as a tax deduction. The IRS states that you must provide "proof" that you stay overnight for a total of two weeks, but is vague about what type of "proof" is needed.

3. Use "Accelerated Depreciation" as a tax deduction for your boat. If you purchase a boat through a company you own, you can deduct half of the total amount you paid for the boat as an accelerated depreciation loss.

4. Purchase a corporate yacht. You are allowed to deduct all of the expenses that pertain to owning and operating the yacht if you own a corporate yacht. You must, however, provide proof to the IRS that the yacht was used for business purposes.

Tips & Warnings

• Consult a tax adviser to make sure that a tax deduction on your boat is legal.
• Save all receipts. You will need these as proof of your expenses. If the IRS requests them from you and you cannot produce them, you will be audited.

Resources

• Get instructions for the IRS Tax Form 1098.