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Any perforations in the deck like access hatches or integrated fishboxes are water-tight, and any gutters that may exist channel water to dedicated drains that directs it overboard. Another aspect of boat deck design that often gets overlooked is purpose-built casting decks on fishing boats.
But different types of fishing styles have different requirements, and some casting decks serve anglers well while others fall short of the mark. Fly fishermen, for example, need perfectly smooth decks with no obstructions or their line can get snagged mid-cast. Items such as chocks and cleats need to be the pop-up or pull-up variety, which are smooth when collapsed.
And bass anglers usually prefer casting decks with integrated foot controls for their bow-mounted electric trolling motor. Construction can be researched, the finish is largely a matter of personal preference, and design can be assessed and tested out on the water. And instead of merely standing on it, make an in-depth assessment of that deck from stem to stern. Back Explore View All. Back Types View All. Unpowered Boats Kayaks Dinghies.
Personal Watercraft Personal Watercraft. Back Research. Reviews Boats Engines and Parts. How-to Maintenance Buying and Selling Seamanship. Back Services. Boats PWCs. Boats for Sale View All. Or select country. Search Advanced Search. Personal Watercraft for Sale View All. Liked it? Share it! Facebook Twitter. With over two decades of experience in marine journalism, Lenny Rudow has contributed to publications including YachtWorld, boats. Best Pontoon Boats in Jeff Hemmel.
Boat Reviews. Best Starter Boats In Staff. Boating Guides. Boat Buyer's Guide. Boat Seller's Guide. Will I use it as my office? Each scenario carries with it certain pros and cons from both a practical and tax perspective.
The intended use of the boat causes the boat to fall into one of the following primary tax categories, each carrying with it certain federal and state tax ramifications: primary home, vacation home, vacation rental, rental, trade or business.
Generally, if a person buys a boat with the intention of living on it and using it as their primary home, they are entitled to the same types of tax benefits associated with owning a house.
The tax benefits include: 1 a deduction for mortgage interest or, in the case of a boat, boat financing interest and 2 a deduction for real estate taxes or, in the case of a boat, property taxes associate with the boat.
This applies to single or married individuals. This also applies to single or married individuals, meaning the allowable amount for this deduction is not doubled for married filers. While many people are familiar with these rules, this will not likely be the relevant scenario for someone purchasing a boat in particular if they want to take advantage of placing the boat into a charter or fractional ownership program. Generally, this scenario results when a person buys a house or boat for exclusively personal use when they already have a primary home.
Thus this purchase becomes their second home, a. The tax benefits are the same as those described above under primary home. The high-level benefit of a vacation rental is that the owner may be able get certain of the benefits available under the primary home and vacation home categories, while at the same time being able to earn income to help off-set certain related costs.
This benefit may be further enlarged due to recent tax reform, which permits certain taxpayers to deduct 20 percent of qualified business income which may, depending on the specific taxpayers situation, include the income from the fractional membership program.
As a general rule, however, in the event of a net loss which boat ownership may produce, particularly if the boat is financed and depreciated quickly , a taxpayer is prohibited from off-setting the net loss against other forms of income, and the loss will carryforward to off-set future rental revenue.
When computing the net income or loss of the rental activity, a taxpayer is permitted to off-set the rental revenue with related expenses, which include depreciation, interest, and taxes. The Internal Revenue Code and Treasury Regulations provide rules on 1 how to allocate expenses and 2 the order in which those allocated expenses may off-set the rental revenue.
First, percent of expenses directly related to the rental activity itself are off-set against the revenue advertising, background checks, initiation fees, cleaning fees, etc. Then expenses that do not exclusively apply toward the rental activity itself are bifurcated between business and personal use of the boat; for example, repairs and maintenance, financing interest, property taxes, depreciation, etc.
The additional benefit in this vacation rental scenario relates to the personal portion of the financing interest and property taxes. This is a common planning strategy where the intended result can differ depending on the facts and circumstances of the individual taxpayer and the chosen methodology. Now assume that the boat is used personally each year for 60 days and rented to others each year for Under another accepted methodology with regard to interest and taxes alone, the personal portion of the financing interest and property taxes could instead be computed by looking at actual rental day use over days; i.
Note that while maintenance and other similar expenses can be apportioned based on days of actual use due their direct correlation to use, courts have repeatedly ruled that interest and taxes are allocated over the course of the entire year e. While the outcomes really depend on the facts and circumstances of the individual taxpayer, it is worth considering how recent tax reform has affected this scenario. First, it may be possible to deduct 20 percent of qualified business income, effectively paying only Second, it may be possible to take advantage of increased section deductions and percent bonus depreciation deductions to depreciate the boat quickly and off-set all rental revenue for years into the future, noting that net losses are not permitted to off-set other types of income from other activities and therefore would carryforward to off-set future rental revenues.
Further, exchanges no longer apply to boats, only actual real property like buildings, houses, and land. Note that there are differences in computing the recapture amount depending on whether the taxpayer depreciated under section or Bonus Depreciation, the former likely causing a larger recapture amount.
On the up side, even within these limitations, the taxpayer is still earning money that may serve to off-set the costs associated with owning a boat. And why not earn money on a boat that might otherwise be sitting unused in a slip. A taxpayer considering purchasing a boat to place into a fractional membership program should consult their tax and legal advisors well in advance of any purchase to confirm the most advantageous structure and course of action.
If a person buys a boat with the intention to rent it, only using it personally for fewer than 15 days per calendar year, then the boat will simply be considered a rental property. While boats are generally considered tangible personal property, the IRS has previously determined that boat slips constitute real estate assets that generate rents from real property, so rental income or losses attributable to the boat slips may be deductible under the passive income rules.
Again, the specific facts and circumstances of each case will be important in making any determination as to whether the rental income generated can be apportioned to the boat slip.
Generally, if a person buys a boat with the intention of using it in an existing, or to establish their own, boat charter business, they are entitled to the same types of tax benefits associated with traditional trade or businesses.
The types of tax rules that apply to a trade or business also depend on how the boat and business are setup. For example, if the business is a C Corporation that owns the boat, then any net loss from the business simply carries forward to future tax years of the corporation. If the business is setup such that the boat is owned by the taxpayer directly, or through some form of pass-through entity S Corporation, Partnership, LLC, Trust, etc.
It is this scenario that entices many would-be charter boat owners, though it is complex largely turning on the specific facts and circumstances for each taxpayer and not without peril. Generally, these complex rules require the taxpayer to demonstrate that the taxpayer is 1 engaged in a trade or business and 2 actively involved in that business.
Failure to satisfy the former could trigger the hobby loss rules and result in either not being able to deduct expenses or not being able to off-set other types of income with the losses from the charter business. Section of the Internal Revenue Code generally allows a taxpayer to deduct expenses associated with the carrying on of a trade or business. A sporadic activity, a hobby, or an amusement diversion does not qualify. The Treasury Regulations associated with section of the Internal Revenue Code present nine factors which might be present to determine whether an activity is engaged in for profit.
While a single factor alone is not dispositive, the IRS will take all nine factors into account. These nine factors include the following:. It is important to note that there have been several tax court cases specifically challenging charter businesses and the courts have continued to interpret and provide examples, beyond those provided in the Treasury Regulations themselves, associated with each factor.
Accordingly, while the taxpayer may be able to satisfy several of the above factors, if the taxpayer cannot show that the activity ever even had the potential of being profitable, meaning that at some point it would recoup its associated costs, then the taxpayer will fail to satisfy what the courts have determined the primary purpose component, and the rules of section will disallow the deductions.
So a business plan, separate books and records, and management agreements alone will not necessarily satisfy the above tests. Further, the taxpayer could be subjected to additional tax assessment, as well as penalties and interest on those assessments going back to earlier years.
Generally, the IRS can only go back three years to assess additional tax due so long as a return has been filed; there is no such limitation for years in which no return has been filed. This is known as the statute of limitations.
In instances, however, where the taxpayer may have underreported his gross income by 25 percent or more due to taking additional trade or business expenses now deemed to be disallowed under section , it is possible that the statute of limitations would extend to six years. Further, the initial burden of proof is on the taxpayer under section to minimally establish the basic elements of the pertinent nine factors listed above, thereafter the burden shifts to the IRS.
The taxpayer gets to off-set all his expenses of operating and financing the boat against his revenue from the business. It is important to note, however, that before one can even conduct the material participation analysis, the taxpayer must determine whether they can structure their charter agreements to avoid being deemed rental activities per se passive activities under section The first and most common exception to the rule involves limiting the average charter referred to as the average period of customer use in the regulations to 7 days or less.
Notably, the regulations include any days that the customer has a right to use the boat, which likely means that all days covered by the contract, and not just days of actual use, would be included in the day count calculation. Where the average charter length is more than 30 days, the taxpayer can still fall outside the definition of a rental activity if they provide significant personal services along with the boat rental. A taxpayer should consult with their legal and accounting advisors well in advance of any boat purchase to ensure that these tests are satisfied if the taxpayer is seeking to maximize the tax benefits under the trade or business classification.
As discussed above under the Vacation Rental section, the impacts of tax reform with regard to a Trade or Business again presuming a structure apart from a C Corporation are the same; i. In a Trade or Business scenario, the impact of an increased section deduction or percent bonus depreciation could serve to trigger extremely large business losses in the first year of the business, which could be used to directly off-set the taxpayers other income assuming the taxpayer is both engaged in a trade or business and materially involved for at least the calendar year in which full depreciation occurs.
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