Can a Boat Be Considered a Second Home for a Tax Deduction?

by Mike Parker, Demand Media
    Deductible interest and property taxes apply to some boats.

    Deductible interest and property taxes apply to some boats.

    Most home-ownership expenses are not tax-deductible. For example, you can't deduct any portion of your mortgage that goes to pay your principal or homeowner's-insurance premium. You can't deduct the cost of upkeep, repairs or maintenance, nor can you deduct homeowner-association fees. But if your boat meets the Internal Revenue Service's requirements as a home, you might be able to write off the interest on your boat loan.

    Main and Second Home

    Before you can write off the interest on your boat loan, your boat must first meet the IRS' definition of a home. The requirements are pretty simple -- any property that has sleeping, cooking and toilet facilities can be considered a home. This includes a single-family house, mobile home, condominium, travel trailer or boat. The boat must be either your main home, where you spend most of your time, or your second home, which is any home you choose to treat as a second home.

    Secured by Property

    You can only deduct the interest on your boat loan if you are the owner of the boat and the loan is secured by the boat. For example, if you don't make your payments and the lender has the right to take possession of your boat to satisfy the lien, the IRS considers your boat loan to be secured by the boat.

    Home Equity Loan

    The interest on home equity loans of up to $100,000 is typically tax-deductible, as long as the loan is secured by your main or second home. You can use funds from your home equity loan to buy a boat, then deduct the interest, even if the boat doesn't have the facilities to qualify as a second home.

    Considerations

    You can deduct personal property taxes on your boat regardless of whether it qualifies as a second home, provided the taxes are only based on the boat's value and the tax is charged on an annual basis. You must itemize your deductions on Schedule A to claim a deduction for mortgage interest, home equity interest or personal property taxes.

    About the Author

    Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.

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