Yacht and boat owners have no escape route for paying boat taxes. If you own one, you have to. Additionally, you will stand a chance to benefit from many opportunities that come with the consistency of tax payment. Four types of taxes stand as your options.
Types of Boat Taxes
- Sales tax
With this type of tax, you pay for it during the purchase of a boat. This type of tax is usually state or local because federal sales tax is not imposed when you purchase a boat.
- Use tax
This tax is your option if you do not pay a sales tax in the state where you bought the boat. You will be required to pay for this tax in the state you will operate and store your boat.
- Property Taxes
If you dock your liveaboard boat, you will have to pay for boat property tax on the boat slip. The local municipality will assess your deeded slip, thus subjecting it to the same boat property tax rates as a home if you own a boat. However, property taxes are included in the monthly lease price if you lease one.
- Personal Property Taxes
You are required to pay a personal property tax annually after you complete a purchase and own a boat.
Benefits of Paying for Boat Taxes
You need to streamline your tax payments with the information above because paying for taxes is inevitable. You cannot escape paying for your boat taxes because you will be under the radar, and will be forced to incur a higher cost of bailing yourself out and paying higher fees like a luxury tax on boats. Therefore, it is important to pay your boat taxes and do so on time.
Another reason you need to pay for boat property tax is to get a good record of tax payments. If you own or have leased a boat, you need to own a good tax payment record since it could save you in many situations. For example, when you get into an accident and need to access your insurance coverage on your boat, you will face fewer hurdles. On the contrary, when you do not have good records of your boat taxes, you might even get in trouble when investigations on an accident are carried out, notwithstanding the loss of benefits like insurance.
Your boat insurance will also be of great essence to you in benefitting from available tax deductions. That is especially if you live in your boat. An example of tax deduction you can take advantage of is one available for you as a second home tax deduction. It is the largest tax deduction available for recreational boat owners. On the other hand, you can claim your boat as a primary residence if you live in your boat. A home office deduction will favor you if you work from your boat.
If you own a boat, you have no option but to pay for your yacht tax because it is lawfully mandatory. If you escape from paying your dues, it will be more costly in the long run. Therefore, paying for boat taxes consistently and honestly will be more worthwhile in the long run.