Owning a boat can be described as a guilty pleasure, especially by those watching from the shore. And in many cases, even boat owners need a little affirmation to justify their expense.
So when boat owners find out that there are several ways to write off some of the cost of their boat as a business expense and reduce their tax burden, it makes the joys of boarding their boat a little more pleasant.
While boat sales have dipped nationwide, they continue to be robust in the South Central Texas area. And that number continues to grow as more potential buyers realize they can recoup some of their expense.
“The general economy of South Central Texas, especially in the San Antonio–Austin corridor has remained solid,” said Jason Stoddard, director of marketing for Clockwork Studios in Austin, Texas. “What you find are people originally from California who retire here. You have snowbirds who retire here. And they are people acclimated to life with a boat. So what are they going to do? They’re going to go out and buy a boat.”
The opportunity to view the newest models on the market will be ideal during the upcoming San Antonio Boat Show at the Alamodome Jan. 24–27, 2008. This year’s event features more vendors than ever before and during the four–day show, South Central Texas residents and visitors will be treated to a wide–array of boats and personal watercraft, as well as water recreation accessories, fishing accessories and boating accessories.Plus, free seminars on everything from fly fishing to wakeboarding and water safety and recreation. Brands exhibiting at the San Antonio Boat Show are: Boat Town– San Antonio, Master Marine, and Sail & Ski. For more information visit the website at www.sanantonioboatshow.com.
As more businesses and their owners look to shore up assets, many are looking at the possibilities and benefits of purchasing of a boat.
Tax specialists across the country agree that the regulations set by the Internal Revenue Service can be daunting and discourage most from ever considering using their boat as a business expense. While the IRS does not allow deductions for rental, depreciation, maintenance, insurance and dockage, there are legitimate tax deductions that provide substantial tax–saving opportunities.
“Trying to understand all the regulations can get a little too technical for most,” said Don Canada, executive director of the Austin Boat Show. “There is no magic bullet, but with the right tax consulting, there are benefits for corporations, limited partnerships and other businesses to own a boat.”
Deciphering the guidelines is like sailing through uncharted waters, but you’ve got to start somewhere.
Many boat owners use their boats to entertain clients and potential customers, and those activities qualify as deductions under business entertainment expenses. But the IRS looks at those expenses very carefully; so thorough record keeping is highly recommended.
The IRS guidelines are very straightforward entertainment expense deductions. There must be reasonable expectations of deriving income or other benefit from use of the boat. Business discussion must actually take place onboard.
In the past, this deduction has been abused, so the IRS is very particular about the documentation of each expense. Among the items that can be listed as deductions in relation to the use of the boat are fuel, food and drinks and specific expenses such as transient mooring fees or fishing tournament entry fees.
Tax advisers say that one of the most commonly misunderstood deductions is the write–off of interest paid for a second home, which in the case a of boat, includes any watercraft that can be lived aboard.
People who own a beach condo or summer home generally take a deduction for the mortgage interest paid on those properties. But often people do not realize that a boat also qualifies for those same deductions.
While the typical 15–foot water–ski boat does not qualify, the IRS has determined that any boat that has a place to sleep, a kitchen and bathroom – even if it is a portable toilet – can qualify for a secondhome deduction. However, you cannot already have a second home that you are deducting.
Yet another way in which owners are using their boats for tax relief is when it’s time to upgrade to a bigger or newer boat. Much like a car, owners can trade in their current boat. But in some cases it makes sense to donate the boat to charity, which can provide a substantial tax advantage.
The IRS only allows owners to deduct the fair market value of the boat and not the replacement cost, but even still, the owners may get more for a donation that if it were sold or traded in. Other things to consider are that it could take a long time to sell the boat, or that the trade–in value is far below fair market value. With a donation, the boat and the tax break are almost immediate.
And finally for those who dream of sailing the world – and want to make some money doing it – owners can charter their boat, taking people on harbor tours or fishing trips and deduct all the costs as business expenses. But there are strict guidelines to follow and the IRS wants make sure that it is a legitimate business and not just a hobby.
Whether it’s for entertaining or a nautical business venture, there are numerous tax benefits to owning a boat. With some homework and a little charting there should be smooth sailing ahead.
Alamodome 100 Montana Street
Thursday, January 24: Noon to 9 p.m. Friday, January 25: Noon to 9 p.m. Saturday, January 26: 10 a.m. to 9 p.m. Sunday, January 27: 10 a.m. to 6 p.m.
Tickets: Adults $8, Child, seniors, students and military $4, Children under 6 – Free Discount coupons available at www.sanantonioboatshow.com (Tickets can be purchased onsite)
