My recollection (I'm retired and no longer an attorney) is that the
yacht is taxed the same as a second home, and that construction interest
is deductible. I suggest you check publication 936 at the IRS website.

Glenn Ashmore wrote:
In accordance with my original plan for paying for Rutu I am going to have
to finance the last $30K for spars, sails and the last items needed for
commissioning. I can't get a permanent loan until she is finished. Within
the next couple of months Rutu will be spruced up enough to give my banker a
tour and get an interim loan until she is finished and I get a permanent
boat loan. In IRS parlance Rutu has 3 bedrooms, 2 baths and a kitchen which
qualifies here for the second home mortgage interest deduction. It will
still be a year before she is in the water. Anyone know if the construction
interest is deductible on a yacht? I know it is on a regular house.