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Old 01-14-2013
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Write off slip fees?

A US boater here. We will probably end up owning something in the 30 foot range. I work from home but imagine a boat that size becoming the place where with the laptop and phone in hand, I do the vast majority of my "office work". Is there any way I can write off my slip fee as office space rental? Thanks.
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Old 01-14-2013
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Re: Write off slip fees?

Home Office deduction rules are vague, but I also understand they are one of the highest filters for an IRS audit. I'm pretty sure there is no scenario where you will deduct your entire home expense, but must allocate a portion equivalent to your business use.

You're best to talk to whomever does your taxes for advice. We're more qualified to give you sundowner recipes.
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Old 01-14-2013
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Re: Write off slip fees?

years ago my accountant told me the quickest way to an IRS audit is to "put a boat or an airplane in to your business" he said if you want a boat or an airplane, buy one and use it, but don't put it in the company, nor move stuff around so that the "company" pays.....

buy the boat, use it, and seek the advice of your accountant to see what legitimate expenses can be written off and deductions taken...especially if you are claiming it as an office. Be aware that even homes being used as an office, can have affect when it comes time to sell.....

there is no free ride...and your insurance may have questions should you incur a loss, while "at work"

YMMV
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Old 01-14-2013
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Re: Write off slip fees?

If you could - see your tax advisor for that -
Quote:
Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities
Home Office Deduction

You'd get 1860 hours of use (full time, holidays etc so that may vary) out of 8760 hours to the year or 21%, and you'd have to apply that to the salon area of the boat only (or actually 1/3 of that 21%.

Say you paid 5k a year in slip fees and that's $1050 in deductible expenses - you'd get some portion of that back (and that's best case, using the whole boat as an office)

At best IIRC that's 70% - 700 bucks, in reality, 1/3 of that (just the salon area).

Is that worth an audit that you will surely fail?
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Old 01-14-2013
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Re: Write off slip fees?

As far as the IRS is concerned, if your boat meets the standard criteria for a qualified home (kitchen, toilet, bed) it is no different from a log cabin. Your rent is your rent, whether that's a slip fee or a landlord, and whatever percent of your home is deductible as a home office, that same percent applies to the rent.

The IRS web site makes home office deductibles and issues pretty clear, if that's news to you, you might want to check it out or ask an EA or CPA for guidance to make sure your "home office" is legit and isn't going to trigger an early audit. Offhand...simply having a home office bumps your likelihood of being audited by enough so that you WILL be audited sooner or later, if that's your life's work.

Of course the "exclusive use" criteria for a home office may be a little harder to establish on a boat, unless you have a separate stateroom for it.
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Old 01-14-2013
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Re: Write off slip fees?

Quote:
Originally Posted by rbyham View Post
A US boater here. We will probably end up owning something in the 30 foot range. I work from home but imagine a boat that size becoming the place where with the laptop and phone in hand, I do the vast majority of my "office work". Is there any way I can write off my slip fee as office space rental? Thanks.
Of course. As My CPA says: IRS will not call you and telling you that you forgot to write off the legitimate deductions. It is up you to take the deduction. However, don't create something from nothing, or you go the jail. But everyone can interpreter tax laws differently. That is why we have lots of tax lawyers.

It is all about documentation. Hey, one can sail his boat to Miami or NYC to attend a profession association meeting. There is no law saying that you must take a train or a plane to get there. Likewise, IRS will not dictate you must buy a Honda for business use instead of a 911 Porsche or Hallberg Rassy.

Consult your tax lawyer and don't go crazy unless you know Mitt Romney.
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Old 01-14-2013
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Re: Write off slip fees?

Good grief.

Lots of us slide by the boat and pull out our lap top for a few hours, now and then. Maybe we futst with a few boat projects while we are there. It's fun. Be glad you have that flexibility.

Better, find a less expensive slip and be less of a cheapskate. Though we don't like taxes, we pay what is due and generally don't find any humor in folks trying to transfer their burden onto us.
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Old 01-14-2013
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Re: Write off slip fees?

When I was writing for more than two dozen publications, articles about fishing, boating, hunting, conservation, outdoor articles with lots of associated photos, both from the decks of my boats and from the decks of other vessels, the boat was considered a tool of the trade and was a legal write-off. The same held true for boat maintenance, slip rent, insurance, etc..., all perfectly legal. I was fortunate in that I had discovered a wonderful book called "Tax Loopholes - All The Law Allows." The publication not only listed the IRS regulations, but additionally, listed several court cases involving those regulations, which would have been legally binding had I been audited.

Of course, you MUST keep written records of each and every transaction involving the endeavor, which in my case was documented using both Quicken and Quickbooks, Intuit programs that I consider invaluable for accurate bookkeeping.

While some unknowing individuals may claim that the easiest way to get audited by the IRS is to claim a home office deduction, that's a load of malarkey. I've had a home office since 1975 and never been audited by the feds. I had a single audit from that state which required me to provide detailed documentation of my deductions and expenses for a specific tax year. I opened my Quicken and Quickbooks programs, and printed out every single report for that year. The reports totaled just over 100 pages of information, all in 12-point font. I sent the reports via UPS with a return receipt requested card, which came back to me about two weeks later. Three months later I received a postcard from the state that said "Thank you for your cooperation, no further documentation is required."

I'm confident that the person that received the package took one look at it and said, $hit, I'm not gonna' go through all this crap" and tossed it in the trash.

Keep in mind that most people don't understand what a business write-off really represents. Essentially, if the write-off is legit, the money you spend will not be taxed as income. Instead, it is looked upon as a business expense, money spent to generate income. Consequently, this will lower your adjusted, gross income by the amount spent. But, you still have to spend the money in order to take the deduction.

I know one person that purchased a really nice sailboat, keeps it in south Florida all the time and charters it out every week of the year with the exception of the month of January, which is when he and his wife go south to escape the cold. He legally can write off all of the expenses incurred for 11 months of year that are associated with the charter business. The charters, by and large, have been paying for the cost of everything, including the purchase price of the boat. He's hoping that when he finally gets to retire, which will be in the next five years, he can move south and spend his final years sailing. He said he's well aware that at that point all those write-offs will become history.

Good Luck,

Gary
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Old 01-14-2013
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Re: Write off slip fees?

Gary-
"I've had a home office since 1975 and never been audited by the feds."
That's like saying no one ever gets hit by a bus, because you never got hit by a bus. Only by a taxi, once.

I've known IRS agents, and EAs and CPAs, and they all say the same thing that published articles say. The IRS has audit criteria. If you meet the criteria, that doesn't mean YOU will get audited, but it does mean they pull a higher percent of returns and ask for audits (or exams, not the same thing but in layman's terms all the same hassle) based on those criteria. If you are self-employed, a certain percent of those returns get pulled. If your income falls in certain brackets, there's another percent pulled. If your deductions exceed a certain percent, you get pulled.

They don't just grab returns and look them over, they do everything statistically. Now, your state tax department? I have no idea, they range from fascist to careless. Heck, I got a demand letter one year saying a certain tax agency couldn't find any proof of my returns for the past ten years to provide them. I sent them back a photocopy of the return receipt for the prior year and a cover letter asking if they had lost everyone's records for ten years, or just mine? Because here's the proof, you did indeed get it. They never responded, I suspect because they actually did lose ten years of data and they didn't want that made public.

Then there's the IRS examiner that I knew. He'd go into a deli, infamous for being a cash business, every day for two weeks to buy lunch. Itemize the bag, napkin, foil two slices of bread, one pickle spear, so many ounces of meat...and then pull apart their purchase orders, to make sure they were selling 20 sandwiches for every 40 slices of bread they bought. "Mice ate it" can only acocunt for so much, and if your health department inspection says no mice problems--that won't wash either. The guys who slip every fourth or fifth order into their pocket instead of the register? Right, they get caught. The cash businesses? Right, they get audited more often. they're pulled and sorted that way. And if they ARE caught, katy bar the door, there's no statute of limitations on tax fraud for how far back the IRS can go on the rest of the returns.

So if I say that having a home office, plus being self-employed, plus adding in a boat (aka luxury yacht) without a dedicated stateroom for the office is going to raise the likelihood of being audited? That's just because it will. Your odds may still only be 2% or 5% but do that for 20 years, and maybe it adds up to 100% sooner or later.

If you follow the rules, that doesn't matter, you can bury them in paperwork and wish them good luck. And if you're a true SOB like me, you can send the cover letter on painfully fluorescent paper, printed in 4-point condensed type, and they still have to read it. But that doesn't change the audit criteria (most of which they won't discuss) or the fact that unless you are a very average worker droid in some big company getting a very average wage statement every week, your odds of being audited (or examined) can easily go up.

The stories the examiners can tell you...Oh, folks are always so clever, but the tax men get paid to follow paper trails, and they're quite good at it. Is some of what they say FUD, designed to install compliance through fear? Sure. But there really are audit flags, exceed their norms in any area for any reason, and you'll get a letter about it.

If they could get the tax code down to four pages, then all we'd have to argue about would be "How much?". Thta would be nice.

Last edited by hellosailor; 01-14-2013 at 06:13 PM.
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Old 01-14-2013
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Re: Write off slip fees?

IRS audit is not a bad thing. The IRS agents or auditors are always professional and courtesy. In fact all Federal government agents are good people, from IRS to FDA inspector/scientist to coast guard. However the monkeys that work in TSA are a totally different story.

They only focus on a specific. They never audit your returns from page 1 to the end to see if they can find fault. They have no intention to put anyone in jails. The audit may be triggered for many things, they just need some clarification on your part. IF you book is well kept and clean. There should NOT be any sweat. If you only have one child and you claimed you have 10 children, THERE may be problem. I trust that you would not do that.

If worse comes to the worst, you just need to pay additional tax plus interest to the Fed. At one time, we got audits, it turned out that overpaid the IRS. We got more refunds plus interest from IRS. So it goes both ways.

I am worried about the off shore weather than IRS.
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