Your yacht may qualify for the same IRS tax
advantages that are available for your home, like
deductible mortgage interest.  And by financing
your purchase, instead of liquidating assets or
paying cash, you increase your financial flexibility.
This enables you to take advantage of attractive new
investment opportunities as they come along...and
the earnings from these investments can easily
exceed the cost of your marine financing.  In the end,
your boat may cost less by not paying cash.

Contact us to learn what advantages there are in
financing vs. paying cash for your next boat.  Our
custom tailored boat loans can provide you with
financial flexibility and increased purchasing power. 

Boat buyers have many choices when it comes
to paying for their purchase, but do they always
make the right one?

Here are some tips on how you can determine if you
are making the wisest choice by paying cash for your
boat... and why you may want to consider financing
your boat instead.

Tax Deductibility of Interest
on Yacht Loans.

Q: Does a boat qualify as a residence for
purposes of deducting interest expenses on a
residence under Internal Revenue Code 163?

A: Under IRC section 163 (h)(2) a taxpayer may
deduct any qualified interest on a qualified residence,
which is defined as a principal residence and one
other residence owned by the taxpayer for purpose of
deductibility for the tax year. IRC section 163 (h)(3)
defines qualified residence interest as any interest
which is paid or accrued during the tax year on
acquisition or home equity indebtedness with respect
to any qualified residence of the taxpayer.

In accordance with IRC section 163 (h)(4), a boat will
be considered a qualified residence if it is one of the
two residences chosen by the taxpayer for purposes
of deductibility in the tax year as long as it provides
basic living accommodations such as sleeping space
(berth), a toilet (head), and cooking facilities (galley).
If the boat is chartered out, the taxpayer will have to
use the boat for personal purposes for either more
than 14 days or 10% of the number of days during the
year the boat was actually rented, in accordance with
IRC section 280A (d)(1).

Q: If the interest expense is deductible, is it
necessary for the boat owner to receive a
Form 1098 from the lender to be able to claim
the deduction?

A: Form 1098 is not necessary in order to receive the
qualified interest deduction. In accordance with IRS
instructions for schedule A, form 1040, if the taxpayer
does not receive Form 1098, deductible mortgage
interest should be reported in line 11 instead of line
10 on Schedule A.

Q: Why should I not borrow against my home,
which I own free and clear?

A: Home mortgage interest deduction is limited to
interest paid on mortgage debt used to purchase or
improve a residence, or to refinance the remaining
balance on a purchase or improvement. If the money
isn't used for the home, the interest expense does
not qualify for the deduction.

Q: How about a home equity loan?

A: Home mortgage interest deduction is limited to
interest paid on home equity loans up to $100,000.
By using a home equity loan, you may limit the
amount of interest that is deductible, if your boat
loan balance exceeds$100,000.

Q: I can borrow against my stock on a margin
loan, at an attractive rate. Because the money
is used to buy the boat, is the interest still
deductible?

A: Second home (boat) mortgage interest deduction
is limited to interest paid on second home (boat)
that are secured by that second home (boat). The keyword is "secured" by boat. A loan against investments is secured by your investment portfolio value, not the boat.