Boat loans can be deductible from income tax under some situations
For Federal tax purposes a boat loan t may be deductible as a second home. The basic requirements are that is has a galley, an installed head,and a sleeping berth. If a boat meets these requirements and the owner has no other second home, the interest on the loan may be deductible. It is also necessary to submit an itemized return. The loan must be secured by the boat.
You may also be able to deduct sales tax paid on the boat, but you cannot deduct both sales tax and state income tax. You can choose one but not both according to the Tax Extenders Act of 2008.Congress tried to eliminate the boat deduction in 2011, and just allow RV’s and second homes to get the deduction. BoatUS was able to stop this through intense lobbying.
Many lenders do not send an IRS form 1098 for boat loan interest, but it is still deductible. If you don’t get one, contact the lender for an interest statement.You enter it on Schedule A along with the lenders tax id. If you get a 1098 , there is a line on the return for it.
Alternative Minimum Tax
If you fall under the AMT because of income, you will probably lose the deduction or part of it. Best advice for that will come from an accountant or financial advisor.
For more details on the mortgage deduction on boats that qualify, go to 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.