Extended Tax Provisions For Boats

By Scott Croft

Congress kept the tax deductions in 2018 for recreational vessels with a sleeping berth, cooking and toilet facilities.

Working on tax documentsPhoto: Thinkstock.com/Kenishirotie

Two years ago, Congress extended some boat sales tax and mortgage interest deductions for recreational boat buyers. Those deductions remain for the 2018 tax season with the recently passed tax overhaul plan signed into law on December 22, albeit with some new lower limits on lending amounts.

Before passage of the Tax Cut and Jobs Act of 2017, BoatUS had concerns that boat owners were being singled out for negative tax treatment. The BoatUS Government Affairs team lobbied for recreational vessels with a sleeping berth and cooking and toilet facilities to be treated equally with second homes and recreational vehicles that may qualify for some sales tax and mortgage interest deductions when filing a 2018 federal income tax return.

"While the perception is that all boat owners are wealthy individuals, the reality is far different," said BoatUS Manager of Government Affairs David Kennedy. "In fact, some 70 percent of all boat owners in the U.S. have a household income under $100,000 per year. This tax deduction gives middle class boating families some relief and helps grow a strong local marine industry."

The new Tax Cut and Jobs Act reduces the previous $1 million second-home mortgage deduction limit to $750,000. "Most new boats sell for far below this new cap, so we don't think this will have much impact for the average boat buyer," added Kennedy.

For your 2017 taxes, the existing deduction remains in place and is offered to new owners who paid substantial state sales taxes on a new or used boat purchased in 2017. If there is a loan taken, mortgage interest paid on the loan may also be deducted from your federal income taxes. Some boaters may be unaware of this potential tax benefit because not all lending institutions send borrowers an IRS Form 1098, which reports the interest paid. Not receiving the form does not preclude taking the deduction. If a 1098 is not available, contact your lender for the amount of interest paid and enter it on line 11 on Schedule A along with the lender's tax ID number. If a form 1098 is sent, simply enter the amount on line 10 of Schedule A.

The new limits on deductibility of mortgage interest and state sales taxes will kick in when boat owners calculate their 2018 tax liabilities. Boaters are urged to contact a tax preparer or financial advisor for more information.

For more details on the mortgage deduction, go to 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. 

— Published: April/May 2018

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