Yes, you can buy a boat and write it off on your taxes; however, it’s not exactly easy to do. There are only two ways you will be able to successfully take tax deductions from owning a boat, and those are:
- Classify your boat as a primary or secondary residence
- Use your boat for a business
Will you be able to write off your boat? Let’s dive more into that below.
Boat As A Tax Write-Off
For a boat to qualify for any sort of business tax deduction or write-off, you have to convince the IRS that you are using it for a legitimate business purpose. Examples of legitimate businesses for boats are:
- Fishing Charters
- Vacation Charters
- Sight Seeing tours
- Dinner Tours
- Party/Wedding Charters
Boats purchased primarily for recreational use (Or for majority recreational use) do not qualify as deductible purchases.
Fact: Boats acquired through trade-in are also eligible for deductions provided they meet the same criteria.
In addition to claiming new boat purchases as deductions on your taxes, you may also deduct any related registration fees and sales taxes associated with the purchase. However, these items must still meet specific qualifications in order to be deducted from your taxes.
Boats As A Business Expense
Reporting a Boat as a Business to the IRS requires that your boat ACTUALLY be run as a legitimate business, and that means that you must be able to demonstrate the ability to make a profit as well as actually making that profit.
To do this, as well as survive scrutiny should you be audited, you’re going to need to keep very good records.
Failure to run the boat as a profitable business and/or be capable of demonstrating that to the IRS could result in your boat being classified as a Hobby, which means no deductions for you!
Business Expense Vs. Personal Use
If you’re reading this, I can only assume you are trying to get away with having a boat to enjoy while also getting the tax benefits that come with using it as a business. If that’s the case, then you will want to pay very close attention to how much you use the boat vs your clients/customers (And document it well).
In order to keep your boat as a business, you will not be able to use it for personal use for more than 50% of the total time it is used. Additionally, any time that you document for personal use will be considered by the IRS as a benefit to you, which means you must pay taxes on that time.
Boat As A Business- Entertainment Write Off
Our research indicates that as of 2017, the ability to get a tax deduction for a boat or a yacht by claiming you were entertaining for business was lost. This is due to the Tax Cuts and Jobs Act.
For what it’s worth, you can still write off 50% of the food you use while entertaining for business on your boat, but the time the boat is used will still be considered personal and therefore be taxable.
Can A Business Buy A Boat And Write It Off Of Taxes?
Yes, a business can buy a boat and use that boat as a tax write-off. However, as we have discussed above, you must demonstrate that the business purchasing and owning the boat has a legitimate business reason for doing so. The types of businesses that could own a boat would be a Fishing Charter or a Sight Seeing Company.
Another type of business most people don’t think about that could own a boat would be a Yacht Brokerage. You might not be able to have it on the books for several years, but brokerages do buy, sell, and take boats in on trade from time to time.
It is certainly possible to get tax deductions or write-offs from your boat, but it isn’t easy. The IRS is watching this type of thing very closely as it has a history of being gamed. The addition of the 2017 Tax law absolutely made using your boat as a business much more difficult, but where there is a will and an excellent accountant, there’s a way!!
Disclaimer: Sportfishtrader has years of experience and hours of research that go into each article; however, we are not certified tax professionals; therefore, we always recommend you consult a tax professional before taking any legal or tax action.