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The taxes associated with owning a boat can be confusing and often vary depending on the situation. Knowing this, you may wonder, can you write off a boat slip?
Owning a boat can open up all sorts of new opportunities to earn extra income and be a lot of fun for you and all the other people that get to enjoy it. However, it's not all fun, and the day will come when you need to figure out the complicated system of taxes surrounding boat ownership.
So then, can you write off a boat slip? Like many of the taxes boat owners have to pay; the ability to write off a boat slip depends on your situation. How you use your boat and whether or not you own the boat slip are both big factors in determining if you can write off a boat slip.
Now that you know how complicated boat taxes can be, you’re probably wondering what you should do. How can you set yourself up so that you can write off a boat slip? Is it better if the boat is your primary residence? Are you able to write off the slip fees from where you keep your boat? Are these tax laws the same no matter what state you are from? These are all common questions a lot of boat owners have when it comes to paying taxes.
Setting yourself up to know what taxes you’ll have to pay can be difficult, especially for first time boat owners. Luckily, I’ve done all the hard work for you. I’ve owned boats that I’ve used both for leisure and business, so whatever you’re current situation I’m sure ill be able to provide you with some valuable insight.
What Is A Boat Slip?
Before we get into all of the complicated tax stuff, it's beneficial to know exactly what we are talking about when it comes to boat slips. So what is a boat slip? Is it some sort of document or piece of paper?
Though it may sound like a boat slip could be a document needed by every boat owner, it isn’t. Though they are similar to docks and the definition and usage may vary by region, a boat slip is essentially are parking spot for your boat.
For a normal dock, you moor the boat parallel to the dock. This allows you to secure one side of the boat to the dock while the other three sides are open to the water. A boat slip is a bit more protected than this. It is surrounded on three sides by a dock so you can only pull in forward and back directly out. A dock may have one, two, or many more boat slips, or it may have none at all. The important thing is that the boat is closed off from the open water on three sides.
Can You Write Off A Boat Slip?
As mentioned before, being able to write off the costs associated with boat strips largely depends on the particular situation. I will be going over the most common taxes associated with owning or leasing a boat slip, as well as, the majority of the most common situations here so that you can have a better idea about what you want to do in your own specific scenario.
However, it is important to mention that tax laws often vary from state to state and even between localities, though many follow the same philosophies and separate boat owners into similar categories. It's best to consult a local tax lawyer to make sure that you know exactly what the laws require in your area and how they affect what you’ll have to pay in taxes.
Owning Or Leasing A Boat Slip And Property Taxes
In general, boats are considered to be personal property by the IRS. However, boat slips, on the other hand, are a bit different. These are viewed as being real estate assets, which basically means two things.
First, if you own any sort of boat, no matter how big or small, and you keep it at a boat slip, you will need to pay property taxes on that slip. If you own the slip itself, the local government will assess the value of said slip and tax you at the same property tax rate as if it was a house. If you lease a boat slip, these taxes are normally included in the lease price of your lease agreement.
Second, if you are renting the slip to someone else, rental income or losses can be deducted under the same passive income rules used to govern most other property rental income like renting out an apartment or house.
Owning A Boat As A Primary Or Secondary Vacation Home
If you live on your boat or use it as a vacation home, you will be subject to many of the same tax deductions associated with normal home ownership, including a deduction for interest payments associated with paying off your boat as well as a deduction for real estate and property taxes.
The existence of the deduction for real estate and property taxes may allow you to write off some of the boat slip fees you have to pay to keep your boat docked. However, there is a cap to this deduction at $10,000, so depending on how much property and real estate taxes you have to pay you, may not be able to write off much of your boat slip fees.
It is also important to mention that this only applies to boats that are used as homes. The IRS requires that a boat must have at least one bed, one bathroom, and a galley or kitchen area for it to be considered a home, so any boats that do not meet these requirements cannot be considered homes and are not eligible for the same deduction.
Owning A Boat As A Vacation Rental
Owning a boat as a vacation rental is a great idea, as it allows you to make some extra income with your boat while still being able to receive many of the benefits and deductions offered to those who use their boats as primary or secondary vacation homes.
The fact that you are making income from your vacation rental will make your tax situation a bit more complicated. However, you should still be able to write off some of the boat slip fees that you pay under the same sort of deductions allowed to those who use their boat as a home. Just remember that in order for a boat to be placed under this category, you must use the boat personally and rent it out for more than 14 days a year.
Using Your Boat For Your Business
If you use your boat for your business, you may be able to write off boat slip fees as a business expense. However, proving that your boat is used for business can be difficult, and the law is a bit vague on the issue.
Essentially for your boat to be considered to be engaged in a business, it must be involved in the business activity regularly and continuously, and the primary purpose of the activity must be to make income.
If you meet these requirements, you should be able to write off some of your slips fees as business expenses against the revenue of your business; however, as the courts often come after these types of businesses, especially charter businesses, it is best to make sure you have the help of a tax expert before you assume anything.
Using A Boat As Transportation
Lastly, if you use your boat to commute to work, you may be able to write off many of the associated fees, including boat slip fees as well as fuel costs, insurance, and repairs. This is a quite common situation; however, in order to be considered as using your boat for work transportation, you must use the boat at least 50% of the time for commuting to work.