NMMA opposes bill dropping second-home mortgage deduction

Published online: Jan 27, 2014 News
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The marine industry is continuing its fight against a change in tax laws that would prevent boat owners from writing off houseboats as second homes.

The Ending Subsidies for Yachts Act, barring the deduction for new mortgages on boats, is pushed by two Democrats in the Republican-led House, Reps. Mike Quigley of Illinois and Tim Walz of Minnesota. They highlight estimates from the bipartisan Joint Committee on Taxation that suggest savings of more than $150 million over 10 years, a number that would grow as the deduction is phased out, according to a Bloomberg News report.

The second-home deduction for interest paid on boat loans is the biggest tax deduction in American recreational boating. It is used on runabouts that have tiny cuddy cabins and multimillion-dollar yachts. Boat manufacturers nowadays have the tax deduction in mind when they install the proper amenities in small boats.

The interest deduction for second homes, with an estimated cost of $8 billion a year, is part of the broader mortgage interest deduction, the future of which is up for debate. The break for boats is a tiny proportion of the second-home total.

Taxpayers can deduct interest on as much as $1.1 million in mortgages on two homes: a "main home," where they live most of the time, and a second home. The IRS does not require them to say how much interest is for the first or second home and the agency does not have data on the cost of the boating break.

The deduction is mostly used by "middle-class" boaters because the wealthy already tend to have multiple homes on land, National Marine Manufacturers Association director of regulatory and legal affairs Nicole Vasilaros told the news service.

The average boat loan is for $49,000 and more than three-quarters of owners have annual household incomes of less than $100,000, she said, adding that the industry estimates about 5 percent of the 12 million boats registered in the United States qualify for the deduction.

The boatbuilders don't have data on how many boat owners use the deduction or their income level, Vasilaros said.

The boating industry contends that many wealthy yacht owners do not use the deduction because their current homes exceed the $1.1 million limit.

"If this whole deduction is going to be eliminated for all players, we would not be happy about it," Vasilaros said. "But it would at least be fair."

Since 2001, the NMMA has contributed roughly $850,000 to federal candidates, according to the Center for Responsive Politics in Washington. Brunswick Corp.'s political action committee gave about $330,000 to federal candidates during that period.

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