Tax loopholes for yacht owners -

Tax loopholes for yacht owners

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By KMOV Web Producer By KMOV Web Producer

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.

There is an odd twist to paying the “in lieu” fee in place of sales tax; the US Coast Guard can commandeer your boat in a “time of need.” But when News 4 contacted the Coast Guard a spokesperson could not remember that ever happening. “It does not seem like anyone is going to be steaming up the Mississippi to attack us or parachuting onto the Lake to take over the United States it seems like a long shot” said Ehresman.
A spokesperson for the Missouri Marina Owners association told News 4 they believe closing the loophole would hurt boat sales.
News 4 will continue to follow the efforts to close the federal loophole.

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