The ability to use your yacht as a second home tax deduction may be threatened by a move on the part of congress. Not everyone feels luxury boat owners should continue to collect deductions on the vessels themselves to the yacht insurance.
In a massive move to reduce tax breaks, those who write the laws are determined to examine all existing rules in order to make revisions. It is being hailed as the largest and most intense revision since the eighties; and the focus is on more than just yachts.
The second home interest deduction is a tax break worth about $8 billion annually, with the break to boat owners specifically estimated to be a very small percentage of this amount.
The way the legislation is written currently, Americans may claim a second-home mortgage deduction for a secondary residence such as a cabin, recreational vehicle, and a boat. Those who want to see the tax break eliminated argue it is subsidizing the leisure activities of the rich.
In order for a second home to qualify right now, the Internal Revenue Service (IRS) requirements include:
- At the minimum a temporary toilet and a stove (even a rudimentary camp stove qualifies)
- A minimum of 14 nights a year spent in it
- A limit of $1.1 million for the primary and secondary homes
Actually, the law does not benefit only the most elite in the country and arguably it makes recreational boating a little less financially draining for many regular Americans. Avid boaters have used this tax break for vessels of all sizes, ranging from sailboats and fishing boats to the most luxurious yachts.
Aside from negatively impacting boating enthusiasts, who benefit from the ability to call their recreational boats a second home, it could harm the boat manufacturing and sales industries. It could hurt marinas and other businesses that benefit from those who enjoy boating like yacht and boat insurance agencies.
Boat manufacturing is an important part of the American economy. According to the National Marine Manufacturers Association, related products and services account for more than $35 billion in sales. Advocates worry that eliminating the tax credit could impair the boating industry as it slowly recovers from the economic downturn.
Alarmist? Not really. When an excise tax of 10 percent was established for vessels tagged at greater than a hundred grand in 1991, the industry slumped and the excise tax was reversed just two years later.
Do you want to register your desire to retain the right to a tax break for a second home? The bill is H.R. 2563.
Have you ever considered whether you have adequate comprehensive insurance for your second home? Contact the yacht insurance specialist at Global Marine Insurance for competitive boat and yacht insurance rates.