Imagine being able to sail down the river in your second home, a home that can catch you a sizable tax break. Federal Tax code allows you to claim the boat as a second home as long as the ship has sleeping quarters, a kitchen, a bathroom and you stay on the boat 2 weeks out of the year. That allows boat owners to receive a deduction on the interest they pay on their yacht.
Congressman Tim Walz (D- Minnesota) wants to close the loophole and save taxpayers money. He says closing the loophole could save the US government 1 billion dollars over the next 6 years. He is a co-sponsor of the “Ending Taxpayer Subsidies for Yachts Act” that is going after the hundreds of thousands of boat owners taking advantage of the loophole. But Walz wanted to clarify, “this is not your person with your pontoon with your canoe this is a person with million dollar yachts that have sleeping quarters and kitchens in them.” This is not the first time federal lawmakers have tried to close this particular loophole. Former “Sen. Danforth started fighting this in 1986 or 1987 I understand that there was a state legislation brought up in MO last year to try and deal with this” said Walz.
That legislation is on a completely different type of tax loophole in Missouri. In the Show Me State, you can avoid paying sales tax when you purchase a boat longer that 25 feet, by paying a flat “in lieu” fee. That could save someone $30,000 when they buy a $500,000 yacht. If that loophole is closed, it could save the state $6 million a year.
Ruth Ehresman with the Missouri Budget Project has been trying to close the so-called porthole loophole for years. “Last year there were 3 different bills introduced initially after a report by the Kansas City Star and gained some national attention the bills went nowhere actually and this year there were no bills introduced” said Ehresman. About 16,000 boats qualified to take advantage of the “in lieu” fee.