|Bill Aims to Sink Yacht Deductions|
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The boating community feels picked on. Legislation proposed this spring seeks to eliminate them from the ranks of second-home owners allowed to deduct their mortgage interest payments.
On May 3, U.S. Rep. Mike Quigley of Illinois, along with Reps. Tim Walz of Minnesota and Gary Peters of Michigan introduced the Ending Taxpayer Subsidies for Yachts Act, HR 1702. If successful, the bill’s authors will see to it that boat owners who classify their boats as second homes can no longer write off their mortgage interest payments as permitted under IRS Service Code Section 163.
Currently, second-home owners may deduct mortgage interest as long as the loans they’ve taken out for qualified residences—primary and vacation homes—do not exceed $1 million. Taxpayers may deduct interest for up to two homes under this guideline.
“There’s absolutely no reason why taxpayers should subsidize luxury yachts,” Quigley said in a press release; he could not be reached for comment. “As we work to address our budget challenges, closing this frivolous tax loophole is a no-brainer.”
Advocates for the boating industry and boating population call the bill misguided and unfair. Because HR 1702 only applies to yacht owners, not those with cabins, RVs or other vacation properties, they see it as an erroneous attempt to cut off tax loopholes for the wealthy. The bills co-authors represent districts in states bordering the Great Lakes where lake boats, cruisers and houseboats make up the majority.
“Overall, it’s not really a well thought out piece of legislation because it doesn’t target who the bill’s authors intended,” says Christine Pomoroski, PR manager and government relations for the National Marine Manufacturers Association (NMMA). “It could apply to a 100-foot mega-yacht, but in reality it is likely a 26-footer, which is a family boat.”
By definition, a yacht qualifies as any vessel longer than 26 feet that includes a head, galley and sleeping berth. New yachts sell anywhere from less than $50,000 to millions of dollars.
“To the untrained eye, all boats may look like Bentleys, leisure instruments of the wealthy, worth pursuing for tax revenue, but they are not,” said Ned Dikmen, chairman of the Great Lakes Boating Federation. “Why are these congressmen picking on a family sport activity that doesn’t hurt anyone?”
According to the National Marine Bankers Association, 83.3 percent of boaters who finance their vessels earn less than $250,000 per year. Pomoroski pointed out that, for the most part, the wealthiest boat owners do not finance their boats and because the second home deduction is based on a mortgage, they would not be impacted anyway. This population typically owns multiple second homes and is likely to apply the deduction to a more expensive, mortgaged property.
“The Ending Taxpayer Subsidies for Yachts Act (HR 1702) is a misnamed and misinformed bill based on the inaccurate assumption that boaters are a wealthy group, when three out of four boat owners in the U.S. actually have a household income of less than $100,000 per year,” said Thom Dammrich, president of NMMA, in a statement.
“As a result of this misperception, HR 1702 unfairly targets boaters, eliminating only the ability to claim a boat as a second home but continuing to allow the deduction for homes on land, vacation homes, condominiums, mobile homes and RVs. Eliminating boats only, especially when they make up
a very small minority of those who utilize the second home deduction, will disproportionately target middle-class boaters and not the wealthiest yacht-owners, most of who do not qualify for the second home deduction on their boats.”
The bill’s authors view this amendment as a way to help shrink our national debt. Said Walz, in a press release, “Closing this tax loophole restores the Mortgage Interest Deduction to its original purpose; helping middle class families realize the American Dream through homeownership.”