Today, I'd like to talk to you about boats and RVs and how purchases of these items can help lower your tax liability. There are things about these purchases that we need to consider, places where there could be some overlap with business activities that might yield some additional benefits and deductions at the business level.
Video Transcript - Boat and RV Taxes
It's time to get down to the Brass Tacks. My name is Mel Sams. I'm the managing associated at Sams CPA. Today, I'd like to talk to you about boats and RVs and how purchases of these items can help lower your tax liability. Now, I know what you might be thinking, "If hey, if I go buy a boat, I go buy a recreational vehicle an RV this is something pretty personal. This is something that I'm buying to use in my spare time and to give me some relaxation and refreshment." Now, while that may be true, there are some things we need to consider where there could be some overlap with business activity that might yield us some additional deductions at the business level.
The first one is you need to consider that when a boat has living quarters, generally meaning there's a bed, there's a restroom, there're provisions where you could make food or store food, these things lend themselves to being considered a second home. When that boat has living quarters, an RV certainly does or at least does in a lot of situations has these things, these are considered second homes because you could live in them if you chose to and, therefore, the interest on the loans, if you do finance these purchases may be deductible as interest on a second home.
Just like if you live in a state where an ad valorem or value-based tax is assessed against the value of your boat or RV you may be able to add these on to your real estate taxes that you're already paying or if you're paying other ad valorem taxes. Now, again, those are all capped at 10,000 now at the federal level. But keep in mind it may help you round out that $10,000 deduction. So just because a boat or RV is purchased for personal use, it doesn't mean there aren't some elements that still could produce a tax deduction.
Now, another question I get a lot is, "Hey, I am in a business where I take clients out on my boat," or, "I drive my RV around the country and I work on my job as I'm traveling. Can I write off some of this stuff?" The answer, in my opinion, is yes. If you're taking clients out on your boat or in your RV or you're working from those vessels while you're traveling, it's no different than having a home office or any other marketing and advertising expenses. You need to keep accurate records, contemporaneous records of who you're with and what the business purpose is and when you're meeting, and if you can keep this documentation then you can deduct a portion of the usage on these vessels as a reimbursable business expense.
So can you buy a boat and put your logo on it and deduct the full cost of the boat as a marketing expense? I wouldn't really recommend that. You can if you want to get audited, but I wouldn't recommend that. However, can you take clients out on your personal boat and deduct some of those expenses against your business income? Absolutely. If you keep the right records, you can and your CPA can help tell you what records need to be kept in order to back these things up.
And let's not forget, speaking of back to the taxes, there's also sales tax charged on these vessels when you buy them, at least in the state of Florida and a lot of other states. You can deduct some of this sales tax towards that $10,000 tax limit that you now have at the federal level. So again, just because you buy something for refreshment, relaxation doesn't mean there're not certain elements of it that can produce a tax deduction for you or they can be used as a business expense. If you have any questions, comments, or ideas for future videos, please let us know. Or if you would like to watch our other videos and get notified of future videos, please subscribe to our YouTube Channel.