Tax Time Tip: Boat Owners May Have Federal Tax Deductions Available
Sales tax and boat loans may afford deductions.

Posted Tuesday, March 16, 2010

 
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ALEXANDRIA, Va., March 16, 2010 - 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. State sales taxes are entered on http://www.irs.gov/pub/irs-pdf/f1040sa.pdf , line 5b.

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.

Some boaters may be unaware of this potential tax benefit because not all lending institutions send borrowers an http://www.irs.gov/pub/irs-pdf/f1098.pdf which
reports the interest paid. Not receiving the form does not preclude taking the deduction. If a 1098 is not available, boaters should contact their lender for the
amount of interest paid and should enter it on line 11 on Schedule A along with the lender's tax ID number. If a form 1098 is sent, boaters should simply enter the
amount on line 10 of Schedule A.

Sorry, AMT
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 http://www.irs.gov/publications/p936/ar02.html or the Fact Sheets . For state tax
deduction information http://www.irs.gov/publications/p600/index.html , which also includes state-by-state tax tables.