Dummy’s Guide to Deducting Boat Loan Interest
Can I deduct the interest I paid on my boat loan?
If the following conditions are met then, yes you can deduct the interest paid on a boat loan as qualified residence interest:
o Boat must qualify as a principal or second residence. The regulations state that a residence generally includes a house, condominium, mobile home, boat, or trailer that contains sleeping space and toilet and cooking facilities. Further, the regs state that the determination is based on all the facts and circumstances, including the good faith of the owner.
o Boat must secure the loan. In other words the boat must be held as collateral for the loan.
o You do not need to receive a Form 1098 from the lender. If you receive a 1098, deduct the interest on Schedule A, Line 10. If you do not receive a 1098 then you should deduct the interest on Schedule A, Line 11, and include the name, address and tax ID number of the lender.
o Only interest on up to $1 million of acquisition debt and $100,000 of equity debt is deductible. (for married filing jointly).
o The deduction is taken as an itemized deduction, so you must itemize your deductions to get any benefit.
o There is no minimum number of days the boat must be used unless the boat has been rented out during the year. However, if you do rent/charter the boat during the year another set of rules apply which do include a minimum personal use requirement.
