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Can you really write off your boat?

“If you really like boating and really like your business, taking people out on it for business purposes will not only improve your business relationships but also add personal joy to your life,” says former insurance executive Paul Gauthier of Bellingham, speaking from personal experience. “If you can offset some of your costs, then all the better.”

Then he warns, if you intend to buy a boat and use it “100 percent of the time for business,” your business will only go downhill, due to neglect. Ongoing maintenance takes a great amount of time and money.

CPA Randy Biegenwald, of Silverdale, says one must keep thorough records of all use of the boat, figuring what percentage is business-related versus personal. That percent of the depreciation and other costs might be written off.

He says that a boat may be used for transportation for the business, such as to deliver products or materials across the water, particularly in a marine area like Kitsap. However, he says the main use of boats by business owners is for entertainment.

Biegenwald says meals and entertainment are only deductible at 50 percent of actual cost. Travel expenses of the specific trip can be counted in full.

Clarke Whitney, CPA of Bremerton, says he owns a boat, and claims it as a second residence. To do so, a boat must have sleeping quarters, cooking facilities and a bathroom.

As for a business owning a boat, if it is a charter or lease business, for example, then all expenses may be deducted. Professional diving, commercial fishing and crabbing are other businesses that legitimately utilize a boat.

However, when entertaining clients, “It gets kind of tricky,” Whitney says. In addition to the cost of fuel, excise tax on the licensing of the boat is deductible.

Business write-offs for boating tend to wave red flags at the IRS, Whitney says.

Virginia Anderson, Silverdale CPA, shares her favorite saying, “Pigs get fed, hogs get slaughtered.” In the same way, the IRS might consider a small deduction for a boat to be acceptable, but if it’s a large deduction, they’ll go after that taxpayer as if out for slaughter.

Anderson says if deducting a percent of the depreciation, upon selling the boat, some of that may need to be recaptured, paying back taxes, according to IRS rules.

If a corporation owns a boat, and employees use it for personal reasons, Anderson says there is a formula for figuring out what amount may need to be considered additional personal income. There are always exceptions, and contacting an accountant is essential.

Gauthier warns, “One should never incur an expense just to be able to write it off,” explaining the actual amount saved is only the percent of your tax rate. The rest of the “write off” comes out of your own pocket.

He concludes that if you do not enjoy boating, no one will have a positive experience on the boat with you. Likewise, if you love it, your guests probably will, too, and that’s good for business.

 
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