Second Home Tax Deduction OK for 2000

Boat/US Magazine, March, 2001

Administrations come and go, but at least one important tax consideration for boat owners remains in effect for the 2000 federal income tax returns: Boat owners who qualify may still deduct mortgage interest paid on a boat that is a "second home."

Under longstanding Internal Revenue Service (IRS) rules, the boat must be a qualified residence and the rules state only that it have sleeping, cooking and toilet facilities, i.e. a berth, galley and head. There are no personal use time requirements unless the boat has been rented out during the tax year.

The other criteria is that the loan on the boat be "secured," that is, the boat is held as collateral by the lending institution and could be foreclosed upon. A line of credit does not qualify as a "mortgage."

To take the deduction, boat owners must itemize their deductions and enter interest paid on Line 10 or 11 of Schedule A, depending upon whether a Form 1098 was received from the lender. (A 1098 is not required to take the deduction.) Only one second home can be deducted.

BoatU.S. recommends that boat owners check with a personal financial or tax adviser on their own tax situation.