Tax time comes again - In Other News

Boat/US Magazine, March, 2002

Good news for procrastinators this year -- April 15 falls on a Monday so the entire weekend of April 13-14 may be devoted to figuring out your income tax returns for 2001.

Boat owners also still have the benefit of deducting mortgage interest paid on a boat loan again, as in years past. The rules have not changed for 2001 and a boat may still be considered a second home for tax purposes.

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.

Taxpayers in the higher income brackets who may be "alternative minimum taxpayers" fall under different rules and the second home deduction may not apply. BoatU.S. recommends that boat owners check with a personal financial or tax adviser on their own particular tax situation. New this year, BoatU.S. has a special arrangement with H & R Block so that for every member the company assists with their taxes, it makes a donation to BoatU.S. (See page 38.)

IRS Publication 936 covers interest deductions. Also check out the IRS Web site at www.irs.gov.