Deductions available on boat loans - BoatU.S.Reports

For those boat owners still working on their 2003 tax returns, it is important to remember that the interest paid on qualified boat loans is fully deductible, according to the IRS. This deduction is one of the hard-fought results of a BoatU.S. lobbying campaign dating back to the 1980s.

To take advantage, two criteria must be met. First, the boat must meet the definition of a second home, defined only by the IRS as a boat with a galley, head and a sleeping berth.

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Second, the boat loan must be a secured loan, that is, a loan in which the boat is held as collateral by the lending institution, and not a line of credit or signature loan. Thus the loan is a mortgage on a second home; however, you are allowed to deduct interest on only one second home.

To take the deduction, boat owners must itemize their deductions and enter the loan interest paid on Line 10 or 11 of Schedule A, depending upon whether or not a Form 1098 was received from the lender. (A Form 1098 is for reporting purposes only and is not required in order to qualify for the deduction.)

Taxpayers who fall into the category of "alternative minimum taxpayers" must follow a different set of rules and these second home provisions may not apply.

BoatU.S. recommends that boat owners check with their personal financial or tax adviser on their own tax situation to get the best advice. IRS Publication 936 covers interest deductions, or you can go to the IRS Web site at www.irs.gov.