What the New Tax Bill Means to Boat and RV Owners
Last month, President Trump signed the Tax Cuts and Jobs Act of 2017, the biggest tax reform in a generation. Highlights of the bill include the absence of a new luxury tax on boat sales as well as preservation of the second-home interest deduction for boats and RVs.
Here is an overview of the most important changes:
Second-Home Deduction: The second-home interest deduction for qualifying boats and RVs (generally determined by the IRS of having the equivalent of a bedroom, bathroom and cooking facilities), was largely preserved. The tax reform package does lower the mortgage interest cap from $1 million to $750,000. For yacht owners and RV owners, the main caveat obviously is that you can have only one second-home deduction, so if you have a standard second home, every year you will need to choose between the second home and the boat or RV each year for your deduction. For tax preparation, make sure to request IRS form 1098 or a statement letter from the lender of your boat or RV to report interest. It is also important to note that if an equity line of credit with your home, boat, or RV was used as security, you’re entitled to deduct those interest charges as well. Additionally, you can deduct not just the interest, but also any points paid to get the loan as well as the penalty for an early payoff of the loan.
Here are a few of the provisions that will likely help keep yacht and RV purchase prices low:
Lower corporate taxation rates – The tax reform lowers the corporate tax rate from 35 percent to a flat 21 percent and repeals the corporate Alternative Minimum Tax. Pass-through rate reductions will help many boat and RV manufacturers keep costs low.
Estate Tax: The estate tax exemption doubled from $5.6 million to $11.2 million for individuals. Meanwhile, a married couple can double that to $22.4 million. This will be very helpful in protecting family owned marine manufacturing plants.
Preservation of the R&D tax credit – The R&D tax credit is important to many manufacturers in order to spur innovation and new technology. The allowance for R&D expenses in boat and RV manufacturer deductions is good for respective industries, but especially for yacht buyers and those purchasing RVs.
About Luxury Law Group
Luxury Law Group is a full-service law firm focusing on transaction and litigation matters related to luxury assets including yachts, aircraft, real estate, custom automobiles, art collections and fine antiquities. Serving clients around the world, Luxury Law Group is strategically positioned, with offices in Fort Lauderdale, Stuart, Washington, D.C., and The Hamptons, to provide concierge law service expected by our diverse list of clients.