New tax deductions for sailors?
 

I subscribe to 3 sailing publications, one general boating publication
("Soundings") and being a member of Boat/US also receive their publications
and don't recall reading of any changes in the tax laws regarding boat
ownership. There may be changes in the tax laws involved if you own a
charter boat and run it as a business, but I find it hard to believe that
I've read nothing about that in any of those publications. I would ask a tax
specialist.
John Cairns
"Jenny MacLeod" wrote in message
.. .


Hello,
This is my first posting, and I'm not too savvy, so please excuse
me if I ask a stupid question. One of the guys I dock near said he
read that there are some new laws this year that make it possible
for sailors to deduct a lot of equipment from their taxes. Is this
true? Where can I find out more about this? That would be great,
since I purchased my first boat this year. I'm getting all of my
paperwork together in preparation for filing on the first day
possible, which, according to the TaxBrain site, is Jan. 16, just a
week away.
Yours truly,
Jenny Mac

New tax deductions for sailors?
 

Treating your boat as a second home has been legit for a while. It has to
have a toilet and stove I believe.

Or maybe you are hearing about something for professional sailors aka
merchant marines?

"Jenny MacLeod" wrote in message
.. .


Hello,
This is my first posting, and I'm not too savvy, so please excuse
me if I ask a stupid question. One of the guys I dock near said he
read that there are some new laws this year that make it possible
for sailors to deduct a lot of equipment from their taxes. Is this
true? Where can I find out more about this? That would be great,
since I purchased my first boat this year. I'm getting all of my
paperwork together in preparation for filing on the first day
possible, which, according to the TaxBrain site, is Jan. 16, just a
week away.
Yours truly,
Jenny Mac

New tax deductions for sailors?
 

On Mon, 12 Jan 2004 21:43:30 GMT, felton wrote:

Joe...

here is a link to what I believe to be a fairly accurate summary of
the current tax provisions relating to charter boats.

http://www.sailonline.com/html/Boat%...ssion_faq.html

Even assuming that you can justify "active participation", which takes
you to Schedule C, rather than the rental activity, it still seems to
me that there is not much liklihood of generating more deductions than
the amount of the income reported.

I've been showing a net loss on my Schedule C for nine years now. I've never
been questioned--and I am in a category that is more at risk for audit than
many.

You would then be faced with the
"hobby loss" provisions, which require you to show a profit or at
least the intent to make a profit.

Yep! Interesting word, "intent." I think the key aspect to doing this
successfully is to generate income from the boat with some degree of regularity.
In my case, I show at least some revenue almost every month of the year.

If you are using the boat more
than 14 days a year, you are required to allocate your expenses
between personal (nondeductible) and business. You can't deduct them
all if you are using the boat more than the allowed minimum.

The dodge here is that, as the owner of a charter boat, there are certain times
that I have to sea test the boat, to be sure it is in good condition. I have
never been questioned about my personal use of the boat--and, so far as I am
aware, neither has anyone else at this particular charter operator.

I have no idea what your numbers look like, but I have always viewed
charter operations as a way to defray the costs of boat ownership, by
making a certain amount of income which, hopefully, covers most of the
costs of maintenance, etc. Generally, that income would be offset by
the amount of the expenses that can be claimed. If you are generating
net losses that you are using to offset other income, you are probably
at-risk in the case of an audit.

I have no loan on the boat. In a typical year it generates enough income to pay
maintenance and replacements. The pre-tax cash flow has been around a break
even for every year I've owned it. Since I run out of depreciation this year, I
will exchange into a larger boat--probably a Catalina 320. That transaction
will qualify as a tax deferred exchange under §1031.

As an aside, how is the cost of your insurance?

It's around $650 a year with $1 million liability and $500 deductible. If a
charter skipper has a claim, he (or she) agrees to pay the deductible. It's
only happened once in ten years.

Liability insurance
on charter boats was out the roof when I had my old boat in a charter
program. I agree with you about the quality of charter operations,
though. I wasn't blessed with one that was looking after my
interests, but seemed more interested in making the charterers happy
by never charging them for things that they broke or came up missing.
I much prefer my simple life of sole ownership:)

There are good and bad points for both.

Joe Parsons

New tax deductions for sailors?
 

Might note also that the tax refund on boaters gas in Washington State has
increased this year to $.28/gal.
Gordon

"Gould 0738" wrote in message
...
Do you use the boat for business?

There are some new tax laws that permit
certain equipment acquisition costs to be written off as "expenses" rather
than
depreciated over the life of the asset.

The "second home" deduction applies, whether you use the boat for business
or
not.