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Do you own or intend to buy a boat and write off its mortgage payments as a second home? Act fast.
Some Great Lakes lawmakers want to eliminate the tax provision giving a tax break on boats classified as second home.
The bill is put forth by U.S. representatives Mike Quigley of Illinois, Tim Walz of Minnesota and Gary Peters of Michigan. It is an easy way of reducing the current financial deficit, Quigley’s spokesman, Aviva Gibbs, said in an email.
“There’s absolutely no reason why taxpayers should subsidize luxury yachts,” Quigley said in a statement. “As we work to address our budget challenges, closing this frivolous tax loophole is a no-brainer.”
Not everyone is happy about the bill.
“It is very unfair that Congressmen Quigley would pick on boaters and not on RV owners,” said Ned Dikmen, chairmen of the Great Lakes Boating Federation.
He said the bill is ill conceived and will not pass.
Ownership of a boat is not necessarily a sign of wealth, Dikmen said.
These boats may come across to people as Bentleys, this is not the case, he said. There are much smaller boats in the water.
The bill will not do the job it intends to, Dikmen said. “People in the upper strata pay cash for their boats and do not need mortgage. The little guy mortgages since he can’t afford it.”
He believes the bill will make the 25,000 voter boaters in the Congressman Quigley’s district unhappy.
The legislation comes from Quigley’s Reinventing Government report, which aims to reduce the financial deficit by $2 trillion in the next 10 years.
“The American people have repeatedly affirmed that home ownership is a high enough priority to justify the cost of the mortgage interest deduction, and this legislation simply asks if boat ownership is also worth that cost when we’re borrowing forty cents of every dollar we spend,” he said in an email. “Think about it this way: if I want to buy a car for my family but don’t have the cash, I have to take out a loan and will typically pay 10-12 percent interest on it. If my neighbor decides that instead of a family car he’s going to buy a boat, he takes out the same loan but he gets to write off the interest. It doesn’t make sense.”
The bill comes as other states such as Florida and Texas move toward capping taxes on yacht sales.
These efforts are not so much to provide a break to yacht owners, but to keep the economic activity surrounding these vessels alive, the San Antonio Express reported.
Loss of employment in the boating industry is a concern of critics of Quigley’s bill.
The bill would impact jobs in the marine and real estate industries since the number of people purchasing boats will reduce.
“Removal of the mortgage interest deduction has the potential to quell any comeback of these two industries and can cost thousands of Americans jobs sending two industries spiraling,” Lou Sandoval, co-owner and co-founder of Karma Yacht Sales, a sailboat dealer serving Lake Michigan and based on the southside of Chicago, posted on the dealership’s official blog.
The bill is pending before the House Ways and Means Committee.
A boat provides solace, freedom and the joy of watching your kids swimming, said Dikmen.
“He’s trying to take that away,” he said. “I hope this bill falls flat on its face.”