Claim Yourself as a Liveaboard? - & Tax Question

[off-the-grid]

I've always heard, from various different forums that if you have a loan on your boat, you don't need to tell the bank your living aboard...unless they have clause against liveaboards, in which case you should have found a different lender in the first place.

But that you should always tell your insurance, because if they find out, you could have all kinds of problems as severe as losing your insurance or being denied a claim.

Then on my trip North I ran into someone who gave me a completely different story. He basically told me that the insurance companies kind of define liveaboards as bums with nowhere else to go, and claiming youself as a live abaord would mean a huge increase in your premium, which I've never heard before. He went on to say if you're living aboard by choice, as in you have friends/family in the area where you can go or enough money to buy rent someplace on land, then technically you're not a liveaboard. Also that when you start cruising you should claim yourself as an extended cruiser, not a liveaboard, because that will also make a difference in how your insurance company charges you.

Sounded like a bunch of semantics BS to me, also he seemed to really base this whole theory on FL, which in general really seems to have it out for boaters these day, but I'm not in FL. My policy costs about 1/3 what it would if I ws in FL, so even if it was to go up a little, I doubt it would be that much.

So, is there any shred of truth to this, or should I be on the phone with my insurance ASAP?

Also, I was thinking, even if what this guy said is true. The tiny little bit my insurance may go up, may be offset by potential tax breaks by claiming the boat as a primary residence...especially being that I have a mortgage on it.

Which brings me to question #2. When tax time comes, for all you TurboTax users out there, do I claim the boat the same as a house? AKA: the screen where it asks "Any major life changes this year, for example bought a home?" do I click yes, and go through that whole process that same as if it was a house.

[Cheechako]

I would say nothing unless they ask for the info. I dont see why you are obligated to give info you are not asked for. Many will ask I imagine. On the other hand, dont lie either for sure. Interestingly, in the mid 80's when I sailed to Mexico from the Pac Northwest, the insurance company I was with offerred insurance that covered "inland waters and within 75 miles of the coast". Therefore I was insured all the way down the rough Pacific Coast (the "graveyard of the pacific") until I exited the US! This was standard cheap insurance like sold for ski boats etc... I'm sure that has changed! The insurance game seems to be very vague at times, I guess they figure they have more money for lawyers than the buyer does! My current auto insurance company asks for the anticipated driving mileage on each vehicle. For reasons I dont need to go into here, I have traded vehicles a lot in the last couple of years. In doing so, I have changed which cars I drive to work etc. I have received 3 different answers from them about when I can change the predicted mileage. Once they said only at renewal time (May every year), then at renewal time they said, only at the year anniversary of insuring that particular auto, (Both these times I wanted to reduce my predicted mileage), Once when I said I wanted to raise it, they did it right then! (more money for them) It's a real racket....

[off-the-grid]

Well the bank made me sign a no charter affidavit, but not one for living aboard, and my insurance didn't ask anything about living aboard either. So as of now, I'm not lying to either, just not providing additional info that wasn't asked for.

I never really thought of this before, but with a vessel of over a certain size, that has a galley, head, and berth...wouldn't they kind of assume that you're going to be living aboard at least part time? At least maybe weekends for example.

[Hud3]

When I recently renewed my T.L. Dallas insurance policy, one of the questions on the renewal questionnaire was, "Is this boat your full-time residence?" I can only assume that the policy premium would be affected one way or the other by the answer to that question, but I'm not sure how. Insurers like it when your house is occupied full time. Maybe they feel the same way about boats???

Originally Posted by grunzster

...Which brings me to question #2. When tax time comes, for all you TurboTax users out there, do I claim the boat the same as a house? AKA: the screen where it asks "Any major life changes this year, for example bought a home?" do I click yes, and go through that whole process that same as if it was a house.

You can definitely claim a deduction for loan interest paid on a boat that qualifies as a "second home". It just has to have a head and the ability to cook food, as I recall, i.e., it needs to be "livable".

[Bash]

Originally Posted by Hud3

When I recently renewed my T.L. Dallas insurance policy, one of the questions on the renewal questionnaire was, "Is this boat your full-time residence?" I can only assume that the policy premium would be affected one way or the other by the answer to that question, but I'm not sure how.

It's possible to buy liveaboard policies that cover you off the premises much the same way that a homeowner's policy does. I have a liveaboard policy that protects me against liability claims when I'm off the boat, and provides for additional living expenses if the boat becomes uninhabitable, and covers theft of personal items on and off the boat. For example, if you break into someone's car and rip off the golf clubs, most people would be covered under their homeowner's policy. Steal my golf clubs and I'm covered under my liveaboard policy.

Back to Hud's question, my guess is that they ask the question on the renewal questionaire so that they could sell you more insurance if you were a liveaboard.

[Maren]

Originally Posted by grunzster

I've always heard, from various different forums that if you have a loan on your boat, you don't need to tell the bank your living aboard...unless they have clause against liveaboards, in which case you should have found a different lender in the first place.

But that you should always tell your insurance, because if they find out, you could have all kinds of problems as severe as losing your insurance or being denied a claim.

This is job for TabbyCat!

[Captain Bill]

You can definitely claim the boat as a second home if it has a head, cooking facilities, sleeping facilities, and Bathing facilities and the loan is secured by the boat. You can't take a second mortgage out on your residence and take this deduction. Turbo tax does not handle it well and tries to put it on the line for a mortgage with a 1099 and it needs to go on the next line. It is likely that your lender will not give you a 1099 because as mine put it " we have no way of telling if a boat qualifies as a second home" so they treat it as a consumer loan. I have just requested a written statement of interest from them every year, which the customer service department is happy to give me. This deduction seems to be a red flag with the IRS for an audit trigger. They sent me a bill for $12000 and change plus interest. I sent them a statement with copies of my USCG documentation (proving I am the registered owner of the boat), a copy of my mortgage agreement, and photographs of the required facilities. About a month later they sent me a letter stating that they were satisfied with the evidence I presented and that they considered the matter settled with no money due. Keep in mind that this is my personal experience, not legal tax advice. You should consult an accoutant or tax attorney.

[1960cjj]

Originally Posted by Captain Bill

This deduction seems to be a red flag with the IRS for an audit trigger. They sent me a bill for $12000 and change plus interest. I sent them a statement with copies ................................they were satisfied with the evidence I presented and that they considered the matter settled with no money due.

So with the IRS you are guilty until proven innocent.

Craig

[Captain Bill]

Absolutely, I wouldn't be surprised to have to do this every year. Last August they had just gotten around to 2006 tax year, this August I'm pretty much expecting to hear about 2007.

[Chrisc]

When I renewed my insurance here in NZ I negotiated a reduction in the premium because I was a liveaboard. I argued that being permanently on board greatly reduced the risk of break-in and burglary, bad weather damage, degradation, ingress of water and just about anything else I could dream up. Happily, my broker agreed with me.

[TabbyCat]

Regarding the insurance aspect...

I dont see why you are obligated to give info you are not asked for.

You must always disclose any material facts to your insurance agent, regardless of whether you are specifically asked the question. Most insurance policies have this written into the policy language, but even if they do not have such language, it is standard maritime law. The reason is that if you don't disclose something that is material (important to) the agent (which then gets passed along to the underwriter), then they might have made a different decision regarding whether to insure you or what price to charge you. If you subsequently have a claim, and it comes out that you kept an important fact from the agent/underwriter, the maritime judge will settle the claim in the insurance company's favor. They will allow them to refund your premium and deny the claim, as if you never had a policy at all. The reason is that you didn't keep your end of the contract, so the insurance company is freed from their end of contract. Some examples of material facts that must be disclosed:
~ Have you had any claims? (they will often tell you how many years back they want to know)
~ Has your insurance been cancelled?
~ Are you a live-aboard?
~ What is the speed of the vessel (mainly for powerboats)
~ Is the boat for sale?
~ Your experience
~ Any criminal convictions or felonies
~ Those are the most obvious ones, but really, just about anything on the application form that you sign is a material fact. Always remember: the application is a contract between you and the insurance company.

We are agents for a large number of insurance companies. I can tell you that some of them market specifiically to live-aboards, while others don't cover live-aboards at all. So you should be looking for a policy from a marine insurance company that is eager to insure your boat, rather than trying to trick a company that is not in the live-aboard market into insuring you.

If you're not sure if you meet the definition of a live-aboard or not, it's best to just disclose the number of months you'll be spending on the boat during the policy period, and let the agent and the underwriter work it out.

[off-the-grid]

Originally Posted by Hud3

You can definitely claim a deduction for loan interest paid on a boat that qualifies as a "second home". It just has to have a head and the ability to cook food, as I recall, i.e., it needs to be "livable".

I don't own a house, so what about as a first home?

[off-the-grid]

Originally Posted by Bash

It's possible to buy liveaboard policies that cover you off the premises much the same way that a homeowner's policy does. I have a liveaboard policy that protects me against liability claims when I'm off the boat, and provides for additional living expenses if the boat becomes uninhabitable, and covers theft of personal items on and off the boat. For example, if you break into someone's car and rip off the golf clubs, most people would be covered under their homeowner's policy. Steal my golf clubs and I'm covered under my liveaboard policy.

Actually you can get this coverage under any policy. I already have it, although there is a limit. Maybe with a live aboard policy there's a higher limit or none?

But you shouldn't really need that much coverage. Isn't part of living aboard, getting rid of all those expensive dirt dweller toys.

Really, my bike and laptop are by far the most expensive things I need the coverage on. Well and cameras and dive gear, but that's all covered under my dive insurance.

[off-the-grid]

Originally Posted by Captain Bill

You can definitely claim the boat as a second home if it has a head, cooking facilities, sleeping facilities, and Bathing facilities and the loan is secured by the boat. You can't take a second mortgage out on your residence and take this deduction. Turbo tax does not handle it well and tries to put it on the line for a mortgage with a 1099 and it needs to go on the next line. It is likely that your lender will not give you a 1099 because as mine put it " we have no way of telling if a boat qualifies as a second home" so they treat it as a consumer loan. I have just requested a written statement of interest from them every year, which the customer service department is happy to give me. This deduction seems to be a red flag with the IRS for an audit trigger. They sent me a bill for $12000 and change plus interest. I sent them a statement with copies of my USCG documentation (proving I am the registered owner of the boat), a copy of my mortgage agreement, and photographs of the required facilities. About a month later they sent me a letter stating that they were satisfied with the evidence I presented and that they considered the matter settled with no money due. Keep in mind that this is my personal experience, not legal tax advice. You should consult an accoutant or tax attorney.

What if it's your primary residence, though? How exactly does that work?

I've always just been a renter, so I don't own a house. Been crashing at the parent's since my last lease ran out last November.

[Bash]

we have to pay a county property tax on the boat, but we get a significant discount because we have liveaboard status.