Mortgage deduction for boats on back burner
Major tax reform seems unlikely to happen this year but bears watching for its potential impact on the marine industry.
Both Senate Finance Committee Chair Max Baucus, D-Mont., and House Ways & Means Committee Chair Dave Camp, R-Mich., have instructed Congressional staff to look at any and all ways to reform the current tax system. That could mean the popular second mortgage deduction, often used to finance boat purchases, is in danger once again.
However, another pending fight over the debt ceiling and other budget issues means there just may not be the “oxygen in the room” to get something done, said Jeff Gabriel, legislative counsel at the National Marine Manufacturers Association.
“With the big fight on the debt ceiling, the big fight on budget cutting, a big fight in sequestration, all packaged together and no appropriation bills done yet … I don’t see the time,” Gabriel said.
There’s a chance something could get done in 2014, but that appears unlikely as well, with immigration reform, the new healthcare laws and other issues dominating the stage heading into the midterm elections, Gabriel said.
Larry Innis, Washington representative for the Mavrine Retailers Association of the Americas, also is hearing that a major bill is unlikely, but that a smaller tax bill could move forward.
He has been told that the second home mortgage interest deduction could be included in that smaller effort, although targeting all second homes, not just boats, Innis said.
That makes it a good time for those in the industry to reach our to their representatives and senators, Innis said.
That’s especially important because of an all-too-common fundamental misunderstanding by many in Washington of how (and by whom) the second mortgage deduction is used.
In June, Reps. Mike Quigley, D-Ill., and Tim Walz, D-Minn., introduced HR 2563, the “Ending Taxpayer Subsidies for Yachts Act,” which would eliminate the second mortgage deduction for boats, but leave it intact for cabins, RVs, etc. A similar provision was included in a broader bill introduced earlier this year by Rep. Keith Ellison, D-Minn. The idea surfaces fairly frequently in Washington.
“I think these guys take a look at this, and they see what looks alluringly like a real populist message,” Gabriel said.
The ultra-rich who purchase megayachts are already not using the deduction for a number of reasons from paying cash to maxing out their deductions to registering ownership under an LLC.
“That’s who they think we’re talking about, but it’s not who they’re going to hit,” Gabriel said. “They’re hitting the middle class and more alarmingly they’re hitting the middle-class manufacturing job.”