With lakes on every corner and angel of our great mitten state, Michigan is full of boaters all across the area. Metro Detroit residents are extremely eager each summer to clean off their vessels and hit the lakes in order to enjoy every ounce of great weather that they can! However, boats not only come with extra responsibility, just like a vehicle, but also special taxes. How can you make the most of your boating season when it comes to paying up in April? E&Y Tax Preparation Services has a few tax tips when it comes to boating across Michigan!
- Tax Deduction – Mortgage Interest: The largest tax deduction that you can take from owning a boat is the mortgage interest. This is the interest you paid throughout the year to finance your boat, and the payments that are made over time. However, don’t assume that all boats qualify for this deduction. Here are a few extra things to know to help make you boat qualify as a home:
- Mortgage interest much be on a loan for your main or second home
- The home must have proper appliances, sleeping areas, and sanitary facilities (which means a house boat would qualify but a ski boat would not qualify)
- You did not sell or rent your boat out during the tax year you’re reporting on
- Tax Deduction – Sales Tax: Most boaters across Michigan are not traveling on fancy yachts and will probably qualify for this tax deduction. When you itemize your tax deductions, you have the option to either claim state/local income tax, or state/local general sales tax. If you chose sales tax, you should make sure to hold onto those sales receipts and deduct the taxes that were paid. Don’t have those receipts? Use the sales tax information provided by the IRS. Any sales tax that you paid on your boat will apply in this area!
- Tax Deduction – State & Local Taxes: The state and local taxes that are assessed for your boat can be deductible if you’ve taken good care of itemizing these areas. Make sure to keep track of the taxes that show the value of your boat, annually, even if you pay on it more than once a year.
- Tax Deduction – Business Expenses: The only time you can deduct business expenses on your boat is when you are not using it for entertainment, or recreation. The IRS is extremely careful to monitor your business expense habits, and a boat can be tricky. What could you deduct on your boat as a business expense? Let’s say you were entertaining clients on your boat, you could deduct a portion of the food expenses, even though the boat as a whole wouldn’t be deductible.
Are you ready to get back on the water now that we’ve managed to save you some money? When you’re looking for more tips on how to make the most out of your boats and vehicles, give us a call at E&Y Tax Preparation Services! (248) 362-1313