The Boating Forum - Writing Off Depreciation

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12-10-2004, 12:50 PM
New boats take a hefty depreciation hit in the first 3-5 yrs. Is there anyway to lagally write off that depreciation? If a boat can be claimed as a second home does that open up any options or do you have to do something like incorporating?

12-10-2004, 12:59 PM
u might be able to if ur using it for a bussiness but other than that i don't think so. u can't deduct cars unless there used in a bussiness.

12-10-2004, 01:12 PM
sinjun is righton, only depreciate if used in business

personal property depreciation is not tax deductible

PS, i have a masters degree in tax, not bragging just fact

2802 trophy 2x225 mercEFI
north miami beach fl. :grin:

12-10-2004, 01:24 PM
Thanks, I guess incorporating as a business is the only way. I noticed that Tiger Woods new mega yacht named Paradise is actually owned by an offshore company that he owns... sure doesn't seem fair.

I've also heard of people getting small business loans to buy a boat to charter (for any reason)...then writing the entire thing off as business expense...all that is needed(so I'm told) is doing the normal business paper work, tax returns etc and keeping a charter log with expense/revenue details. I think they have to do so many charters. I'm sure there's a lot more to it than that but with the price of boats these days any angle may be worth a look.

12-10-2004, 01:24 PM
Rumor has it the IRS is really beginning to crack down on people who have a part time charter/commercial fishing businesses and write off huge amounts of costs, including tens of thousands in depreciation, over and above their charter/commercial income. This means offsetting earned income from a real job i.e. banker,sales or other primary occupation for the operation of a swank sportfish boat. Happens all the time- Beware

Recovery Room
12-10-2004, 01:47 PM
True, having the boat owned by a company or corporation does not make it a business expense. It must be used for business purposes and is likely going to increase your chances for an audit.

12-10-2004, 02:05 PM
The irony is that many so called commercials reap say $5,000 in revenue and have $40,000 in expenses which they use to offset there real income from another job. We, the ordinary tax payer picks up the slack. Turn them in for the reward. No problem with true commercials.

12-10-2004, 02:10 PM
Boat second home = interest deduction for an outstanding loan, not depreciation.

12-10-2004, 02:10 PM
dor - 12/10/2004 2:05 PM

The irony is that many so called commercials reap say $5,000 in revenue and have $40,000 in expenses which they use to offset there real income from another job. We, the ordinary tax payer picks up the slack. Turn them in for the reward. No problem with true commercials.

That would be a hobby loss then, and thus not deductible. You can deduct anything you want, as long as you are willing to pay the penalties and interest if you get caught. (aplologies to Don Farmer, CPA) ;)

12-10-2004, 02:19 PM
recovery room, good point. happened to me, in early seventies Fla. made new law requiring anyone selling fish to have a SW products license, i sold a few fish noe and then to help cover expenses. Sooooooo, Fla put me in the commercial fishing business by making me buy the lic if i wanted to sell a few fish. started filing sched.c for business, never to loss against ordinary income, just enough to break even and take boat depreciation. IRS audits me in 1982, said i coulnd't run business at loss or no profit for more than 7 yrs! i was working at Pan Am at the time and i told IRS PA has been claiming to lose money for over ten years!!!! and you haven't closed them down.
they could't find that i owed any taxex, they just WARNED me that this would be audited every year if i continued!!! BIG BROTHER

2802 trophy 2x225 mercEFI
north miami beach fl.

:mad: :mad: :mad: ;? :( ;? ;? ;?

12-10-2004, 02:20 PM
Dor...I thnk you hit the nail on the head

12-10-2004, 02:21 PM


don't get me started......

Yes, you can write off the interest as a second home only if it has a galley head and berth ....

but for depriciation it would have to be used for business purposes...

Personal Property tax? I live in Hampton, and we don't have personal property taxes on boats...

"Unlike Taxes, Death doesn't get worse every year"

Bailey Boat
12-10-2004, 02:27 PM
Brown Dog Guide Services, LLC. Hunting and Fishing the Carolinas, at your service. I’m part time and my accountant has me track total hours of use per year on both boats (hour meters and logs are priceless) calculates depreciation and applies the business use portion to Brown Dogs tax return. (this also applies to related equipment) HOWEVER, I only make enough money so the depreciation covers the income. The “tricky” part for me is when I as (Creative Consulting, my primary business) hire myself to take business clients out. My backside on the deal is when the asset is written to zero and is basically “worthless”. An upside is the ability to participate in “Guide Programs” such as Merc, Suzy, Columbia, Shimano, Remington, Browning, Cabela’s, etc…. some of these programs are priceless.

12-10-2004, 04:08 PM
In Mexico I pay about 40% of my income as an employee, and this is hard to swallow as I always had my own business' before that were pretty much tax free.
Anyway I will incorporate again next year as a boat builder, and build a few boats, as I manufacture just about every other thing under the sun, without and real personal benefit.
Figure the boat business will cover my demo trips and house office rent in Puerta Vallarta so that I can write of a little from the real job, but Mexico is still easier than the states on their enforcement.

12-10-2004, 04:15 PM
In order to write off business expenses as a tax deduction to income earned from another business or job you must have a legitimate money making business. If from your side ybusiness you show the IRS earned revenue of $1,000 and $10,000 of expenses you do not get to write off $9,000 on your other income. I think your writeoff is limited to amount of revenue, or $1,000 in this example.

12-10-2004, 05:41 PM
However, if your "business" suffers a loss at the end of the year this loss may be deducted from your other income. It is right on the front of the 1040. The key is if you suffer to many losing years the IRS will disallow all losses and say it was only a hobbie. Then you may suffer paying back taxes plus interest for as many years as they want to go back and recalculate and disallow your deductions. It simply isnt fair to be dishonest.

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