How Do You Pay Taxes?

42ndstreet · #1 (**permalink**) 11-05-2006

I am 41 years old and married. Our plan is in 2012 to buy a bluewater cruiser(used) and circumnavigate...sound familiar?
We currently live in NY state. We would like to move in about 2 years. Should we take tax implications into account?

camaraderie · #2 (**permalink**) 11-05-2006

No...I think that you should be thankful for the opportunity to pay NY taxes even while you're gone!

Seriously...investigate St. Brendan's Isle which can give you a Florida Address and get your mail to you and establish residency in a place where there is no income tax. Depending on the boat you buy...you may want to move it quickly out of state to avoid sales tax and keep moving quickly staying no more than 90 days in any state until you head offshore. If you plan on owning the boat a while before taking off, this will be impractical bu if you are NOT a resident of the state you buy the boat in, and head out fairly quickly, you should be able to legitimately avoid a big tax bill. Of course a lot could change tax wise between now and 2012.

42ndstreet · #3 (**permalink**) 11-05-2006

Great advice! We want to take off within 6 months of buying the boat. We will be sell some real estate to do this, we would prefer to pay for boat with cash. Any thoughts? Do you continue to pay state tax when out at sea? Is my boat interest deductible? Thanks to all.

sailingdog · #4 (**permalink**) 11-05-2006

If your boat has a galley and fixed head, the interest on the loan may qualify as a second home, and be deductible. You'd have to check with a CPA or tax attorney to know whether the excise/personal property tax on the boat is deductible or not.

SPASSHABEN · #5 (**permalink**) 11-05-2006

Hello all I'm new to sailing, even though I have sailed before, I just moved to New York from Delaware to work in New York City, and I'm seriously considereing buying a sailboat to live in. I haven't even started to iron out the details, ANY ADVICE???

JakeLevi · #6 (**permalink**) 11-06-2006

Hi Cam
Having a St Brendans address wouldnt avoid sales tax on the boat would it ?

Two other states without state taxes the last I knew are WY and Alaska. WY maynot be two practical for a circumnavigator :-P

What states donot have sales tax ? None that I know of.

I-33 · #7 (**permalink**) 11-06-2006

I believe that North Carolina exempts boats from sales tax.

Jotun · #8 (**permalink**) 11-06-2006

Delaware has no sales tax.

TrueBlue · #9 (**permalink**) 11-06-2006

Rhode Island has no sales, or annual luxury tax on boats.

camaraderie · #10 (**permalink**) 11-06-2006

A few points:
1. No matter where you establish residency for personal and tax reasons...no state can tax a boat that is not kept within the state or purchased there.
2. If you purchase your boat and document it federally...you do not have to register it in ANY state unless you leave it in that state for a period of time...generally 90 days or more.
3. Simply having one address or another will not avoid sales tax if the boat is kept in a state that has a sales tax OR an annual property tax. They all have rules to prevent this dodge. The boat must be removed from the USA OR kept in a state that has none of these taxes...NOTE...I said KEPT not registered. Example: Florida WILL tax a boat that has a Delaware registration if the boat stays in Florida more than 90 days.
4. St. Brendan's Isle's advantage (aside from their mail services!) is that it allows you to tell NY or any other state that you are florida residents and you file your federal and state tax returns with a florida address. Since florida has no personal income tax..this is way better than NY! However...they do have a passive income tax so make sure you are not affected. Any assets in stocks,bonds, funds INCLUDING money market funds over 250K are taxed at 50 cents per thousand...not much for most people but something to be aware of. SAVINGS/CD's are not taxed.
5. Finally...if you buy a boat in a state with low or no sales tax and PAY it. When you move your boat to a different state, they can hit you for the difference. Example: If you pay 2% sales tax at purchase in some state, Florida will hit you for the difference between their 6% rate or 4% when you move the boat there.
6. Yes you can deduct the interest on your boat loan for federal taxes much as a house as long as you have a galley and head. If you have no income 'cause you're out cruising this is not important as the standard deductions will offset taxes unless you are quite well off in investments!
Hope the above is helpful.