When buying a boat, there is usually sale tax associated with the purchase. The sales tax rate varies from state to state. Some states impose no sales tax at all (Delaware and Rhode Island). Others may tax up to a certain amount of the purchase price. For example, New York pays sales tax on the first $230,000 of the purchase price. Other states have a flat rate, such as3% in North Carolina, 3.3% in New Jersey, 6% in Florida, 6.25% in Texas).
Personal property taxes are applicable for any movable asset, like an RV, plane, or boat. Most likely, you won’t be able to avoid personal property taxes each year, but it’s useful to look at the benefits some states offer. For example, in Virginia Beach, the state will drop property taxes if the boat owner keeps the boat in the city for at least six months and one day.
You should never have to pay sales tax in more than one state. For example, if you buy a boat in North Carolina and use the boat in New Jersey, you should not have the pay New Jersey’s 3.3% sales tax .
However, if you did not pay the sales tax in North Carolina, then you will probably have to pay a use tax in New Jersey. Use tax refers to a fee for using your boat in that certain location. If you plan to buy and use your boat in different states, it can be helpful to pay a use tax instead of the sales tax if the rate is lower.
There are a few scenarios where you can write-off some of the costs of boating for your return. See them below:
If your boat is a second home, you could possibly deduct this expense from your federal tax return. A boat is considered a second home if it has a bathroom, sleeping berth, and a galley. You’ll need to itemize deductions.
Though this scenario is unlikely, if you donate your boat instead of selling it, you can claim a tax deduction. You’ll need an appraisal form and can only deduct its fair market value. The charity you choose must be a non-profit organization. You won’t have to deal with the paperwork involved with selling and you won’t need to find a buyer. The charity should handle all the paperwork.
All-in-all, taxes are evitable. It’s best to speak with an accountant or maritime attorney to see if there are any write-offs available with your boat.