Kent Webb plans to write off part of the interest he pays to finance what he considers his second home, a luxury fishing boat named the Moonlighter.
Calling such tax breaks loopholes for the wealthy, congressional Democrats have other ideas.
They want to eliminate the 73-year-old North Carolina physician’s deduction as part of proposed tax-code revisions this year, potentially the biggest revamp since 1986 and one in which lawmakers have pledged to scrutinize every tax break.
The second-home mortgage deduction, which also benefits owners of cabins and recreational vehicles, is the boating industry’s biggest tax break and applies to vessels ranging from tiny sailboats to multimillion-dollar yachts.
Besides having at least a temporary toilet and camp stove, the only other Internal Revenue Service qualifying requirement is that taxpayers spend at least 14 nights a year in their second home if they also sometimes rent it out to others.
“It has been a significant factor in my decision-making,” said Webb, whose 60-foot (18.3-meter) yacht was listed for $2.6 million when it was for sale in 2013. “It is so unfair to target people who want to use their boat as a second home.”
Boat manufacturers are gearing up to protect the break, leveraging campaign contributions and drafting form letters for boaters to send to lawmakers. The industry has more than $35 billion in annual U.S. sales of products and services, according to the Chicago-based National Marine Manufacturers Association.
Elimination Advocates
The Ending Subsidies for Yachts Act, barring the deduction for new mortgages on boats, is pushed by two Democrats in the Republican-led House, Representatives 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.
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.