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Go Back   SailNet Community > Out There > Cruising & Liveaboard Forum > Living Aboard
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  #11  
Old 08-09-2007
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The boat loan is considered a mortgage just like a home loan by the IRS IF the boat has cooking, sleeping & toilet accomodations. If you bought the dockage as a part of the boat loan then you might be able to deduct the interest.

Remember, it's the interest you deduct from taxable income.

6string...haven't heard back from you yet...any news from your accountant?
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  #12  
Old 08-09-2007
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The www.irs.gov web site pretty much answers all these questions very clearly, including the critiera for "home office" deductions. If your numbers are valid, it should not be an audit flag any more than filing a Schedule-C is an audit flag. After all, even the IRS knows that the "postage" you buy for your own business is usually going to be used to send out personal mail as well. Some things they let go as trivial.

On the home office deduction, they are fairly strict about "exclusive use" and "separation". If you have a home office, but sometimes the grandkids sleep over....Ooops, not in that room. At least, not in any way that is documented.

I've known a few IRS auditors, and enrolled agents. Most of them really don't care about the little things, they assume everyone cheats a little and they really don't care to waste their time on it. On the other hand--if they think are being conned, they become bulldogs.

One fellow audited (full audit, not just an examination) a "fruit and vegetable" store. Cash business where cheating is rampant, like many food and entertainment businesses. He couldn't find a thing wrong with the shoeboxes of receipts they brought him. Several years later, same location new owners (all resident aliens coming and going, not that US citizens do much differently) and he's going over a shoebox of receipts again. He sees a receipt for a cooler that just looks familiar.
So he pulls the COPIES that were filed during the audit of the previous business at that location, and finds they even passed on the same boxes of receipts--with just the dates altered. Ooopsie, he took the entire box and said "ALL DEDUCTIONS DENIED." Then they went to the tax court--and the cleaners.

Office on a boat? No problem, just make Real Damn Sure you can document it. If you get pulled for a tax examination (which is nowhere near what an audit is) they will simply ask for documentation, and if that is in order, that's all.

But if they stop by the boat, and find your "office" is also being used to stow something, or has the nav desk in it...Off to the cleaners you go.

Incidentally, the boat loan is NOT considered a home mortgage unless the proper paperwork has been filed for it. I don't know the form number--but there is a "mortgage loan" form that has to be filed, up front, by the lender, to make it qualify.
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Old 08-09-2007
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Quote:
Originally Posted by Shack View Post
I wonder if there is a differentiation between a "home office" and "biz use of home". The difference benig a "shop" or "studio room" that is dedciated to a craft or active production of some sort. I'd have to review my 1040's, but I don't think that we have ever checked such a box.
This has got me wondering, as well. I do underwater video and the boat is sometimes used to get to sites. Not really an office in that case, more like transportation.
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Old 08-09-2007
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One thing that the IRS requires for the boat to be considered a second residence is a permanently installed marine head and a permanently installed stove. A porta-potty and camping stove don't cut it regardless of how expensive the boat is.
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  #15  
Old 08-09-2007
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Max, if you are self-employed your "transportation costs" to perform your work would be covered the same way, whether it was by car or boat. It's still a personal vehicle being used for business, although I'd bet that if you asked the IRS what the "business mileage rate" for boats was, you'd get transferred a few times before someone broke down in tears--or gave you an answer.

OTOH if you chartered someone else's boat--the whole charter cost becomes a business expense. But if your boat is your home...you haven't left home at all, have you?

If you don't have a CPA or EA doing your taxes, you can always write to the IRS and ask for an "advisory opinion" on what would be proper. That might not be binding on them (even though they issue it) but it would ensure that you at least weren't penalized for doing it that way afterwards. (They might disallow the deduction, but normally that's all--no vegence fee.)
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Old 08-11-2007
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Deductable interest on a boat loan?

Quote:
Originally Posted by hellosailor View Post
Incidentally, the boat loan is NOT considered a home mortgage unless the proper paperwork has been filed for it. I don't know the form number--but there is a "mortgage loan" form that has to be filed, up front, by the lender, to make it qualify.

HS- Proper paperwork? This is interesting. Would this make a lender less apt to approve a boat loan for a "live-aboard?"
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Old 08-11-2007
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Shack-
I don't think it has anything to do with the lender being more or less willing, but rather whether the lender knows what they are doing.
In case you haven't heard there is this stock market "adjustment" and failure of some mortgage markets going on right now, because so many big lenders had no idea who they were lending money to.
Same same for boat lenders. A marine lending company, a credit union, a savings bank, a mortgage loan company, maybe your local loan shark?...All may be giving out "boat" loans and sometimes all they know is that it is a secured loan, with no concept that you want to take mortgage deductions for living on it.
From what the IRS said, if the lender doesn't give you the right form--then all you have is a secured loan, not a mortgage, and you can't take the mortgage deductions without having the right form on file for the IRS.

For instance, in theory I could charge an older cheaper boat to the foolishly large line of credit on my credit card. And then, immediately transfer that balance due to a new credit card which is offering me "zero percent APR for life on all balance transfers made in the first 90 days". Effectively, I could get the boat loan for ZERO PERCENT INTEREST. But since it would be a "credit card retail purchase"...there's no IRS form, no one at the cc company has any idea what form I need, and the IRS probably would argue about the deduction.

I honestly did get a "zero percent for life" invitation in the mail today....and there's a devil on my shoulder saying gee, this could be interesting.
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Old 08-12-2007
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Gotcha!

HS -
Okay, that makes sense. Now, on a slight change of tack - why then would I hear people talk about avoiding mentioning "live-aboard" when securing a boat loan? If one plans to move aboard after purchase or even somewhere in the future ... why is that such a negative thing? How would live-aboard status negatively affect the boat loan process? It seems counterintuitive if one wants to use mortgage deduction?

That devil on your shoulder probobly has a tattoo under his arm with legal fine print that commits you to something- somewhere. Can't get something for nothing.
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"why then would I hear people talk about avoiding mentioning "live-aboard" when securing a boat loan?"
Probably because the moneylenders get nervous when you tell them "I'm going to take your assets and pretty much cut all my local ties and obligations and, haha, put lots of use on the asset and possibly take it to places where yo can't find it much less repossess it."

International repossession can be a costly business, especially if the vessel is occupied. Conventional lenders like conventional risks and conventional people. And except for a rare few cultures that sure aren't in the US, "boat people" are unconventional. Which makes them risky business.

Got a house? Don't pay your boat bills? OK, I can take action against the house and other assets. Only asset is you boat? Gee, first I have to FIND it. So, better to say "I'm going to take a deduction for a vacation home, I need those papers" and not say a thing about moving aboard and cutting the lines.

At least, that's how I've heard it explained, and it makes sense to me.
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Old 08-12-2007
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Hellosailor, A very good explanation.
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