A. Yes. The tax law states that you can deduct mortgage interest on your principal residence and one other “qualified” home. A boat can qualify as your second home if it has sleeping, cooking and toilet facilities. You don’t have to actually “live” there.
Even better: It doesn’t matter if you own another home, such as a vacation home. The IRS doesn’t decide which facility you must treat as your second home for mortgage-interest-deduction purposes. You decide that. For instance, you can choose the boat as your second home for this purpose if your vacation home is already paid off (i.e., no more mortgage-interest deductions) or if the boat generates bigger interest deductions than the home does.
In other words, it’s nothing but smooth sailing ahead.
Tax bonus: The boat’s cost can generate a big write-off if you elect to deduct sales tax. Because a boat is considered a big-ticket item, you may be able to deduct the resulting sales tax in addition to the usual table-based sales tax amount in lieu of deducting your state income tax (if any).
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