If you're looking for a new way to placate the IRS wolf at the door, you might want to buy a boat. A big boat.
Or how about a camper van? Or that trailer you've always wanted? According to research requested by the Deseret News, the interest on any of those big-ticket items may be completely deductible.Salesmen at the 24th Annual Utah Boat, Sport and Travel show at the Salt Palace last week were telling prospective buyers of big-ticket recreational vehicles that the interest on their financing is 100 percent deductible under the new tax laws.
Boats. Vans. Trailers. It didn't matter, the salesmen said, the interest on financing was 100 percent deductible under the second-home provisions of the new tax laws.
Being by nature a skeptical bunch, the News checked it out. And you know, the salesmen may be right.
At the newspaper's request, the tax manager at Neilson, Elggren, Durkin and Co. researched the second-home provision from the U.S. Treasury Department Regulations to see what implications it has on the purchase of sport vehicles.
He found that some vehicles can, indeed, be treated as second homes. For qualifying vehicles, "the interest paid on any portion of the purchase that is financed would be 100 percent deductible on schedule A of the individual form 1040," said Robert Hunter, tax manager at Neilson, Elggren, Durkin and Co.
Here's what they mean by some vehicles. "The regulations specify that the facilities must contain sleeping space, toilet and cooking facilities. And then they list some potential structures that could qualify: houses, condominiums, mobile homes, boats and house trailers," Hunter said.
The law does not say whether the toilet or cooking facilities have to be a permanent fixture or not, he noted.
But it does say in order to qualify a purchase as a second residence, one must use it as a residence, Hunter said. The code refers to the vacation home rules, which requires one to stay in a residence 14 days out of the year to qualify it as a vacation home and use it as a tax deduction, he said.
If one used the vacation home guidelines in writing off interest on a second-home, one should plan to stay in the second home 14 days each year.
That's the way the salesmen at the Boat, Sport and Travel Show saw it and they repeatedly reminded prospective buyers of that.
They also warned consumers that they couldn't write these purchases off if they already had a second home. Boat salesmen added that in order for a boat to qualify, it must be "fully self-contained." Hunter said he saw nothing in the law which specified that.
Boat salesmen are attributing the surge in the sale of big boats to the new tax laws. People are spending a few extra thousand to get a larger boat with toilet and sleeping facilities so they can write off the interest, said Joe Housley, with Peterson Marine, Draper.
Camper vans are not specifically mentioned in the tax code. Van salesmen claimed that camper vans are deductible because they have toilets, sleeping and cooking facilities, but they admonished prospective buyers to check with their accountants.