Boat Living: Qualifying Vessels As Residences

The definition of a primary residence varies depending on the country and state. In the US, a boat can be declared as a primary residence as long as it has permanently installed cooking, sleeping, and toilet facilities. This can have tax benefits, such as tax-deductible interest payments and a $250,000 capital gains exclusion. However, there may be challenges in finding marinas that allow liveaboards, and the cost of moorage, water, and power can be high. In Canada, there are no regulations against living on a boat, except those related to septic disposal. However, it can be challenging to find marinas that allow liveaboards, and the cost of moorage can be expensive.

Tax consequences

In the US, a boat can be declared as a primary or secondary residence, provided it has permanently installed cooking, sleeping, and toilet facilities. This has several tax implications, including:

• Tax-deductible interest payments on the loan used to buy the boat, as long as the boat is security for the loan.
• A $250,000 capital gains exclusion.
• A homestead exemption for property taxes.
• A home office deduction if you work as a writer or consultant on the boat.
• A home mortgage interest deduction if the boat is a second home.
• Entertainment expense deductions if you use the boat to entertain clients.
• Alternative energy credits if you install solar panels to charge your house batteries.

However, there are some important considerations to keep in mind. Firstly, the IRS allows taxpayers to designate only one residence as a main home at any given time. Secondly, the portion of the boat used for residential living is the only part that qualifies for homeowner tax deductions. Therefore, if you use your boat for both residential and business purposes, you will need to divide it accordingly and allocate the appropriate deductions between personal and business deductions. Additionally, if you decide to treat your boat as a qualified second home, the same homeowner deductions will apply as for a primary residence.

Address and registration

In the United States, a boat can be declared as a primary residence, provided it has permanently installed cooking, sleeping, and toilet facilities. This can have tax implications, such as tax-deductible interest payments and a $250,000 capital gains exclusion. The process may vary from state to state, but generally, you will need to provide a physical address (such as a marina) in addition to a PO Box for mailing purposes. This physical address will be required for various purposes, including driver's license, insurance, vehicle registration, and delivery services.

For tax purposes, the boat must be designated as the main home, where the taxpayer lives for most of the year. The Internal Revenue Service (IRS) allows taxpayers to designate only one residence as their main home at any given time. It is important to note that the boat must be security for the loan used to purchase it to be eligible for mortgage interest deductions.

In terms of registration, it is essential to comply with local regulations. For example, in Vancouver, there are restrictions on live-aboards, and some marinas may have waitlists for moorage. Additionally, there may be costs associated with moorage, water, and power, which can be significant. Therefore, it is advisable to contact local marinas to inquire about their specific rules and requirements.

When declaring a boat as a primary residence, it is important to consider the tax implications and address requirements. By providing the necessary documentation and meeting the eligibility criteria, individuals can take advantage of the same tax deductions available to traditional homeowners.

Boat requirements

To qualify as a primary residence, a boat must meet certain requirements, which may vary depending on the location. Here are some general guidelines and considerations:

Basic Amenities

The boat should have permanently installed or built-in cooking facilities, sleeping quarters, and a toilet with exterior evacuation. These are essential requirements for a boat to be considered a primary or secondary residence for tax purposes.

Size

While not a requirement, a rule of thumb suggested by some sources is that the boat should be at least 26 feet or larger and have an enclosed cabin suitable for living aboard.

Security for Loan

If you intend to take advantage of tax deductions, ensure that the boat is used as security for the loan used to purchase it. This is a crucial criterion to qualify for mortgage interest deductions.

Mooring and Marinas

Finding a marina that allows liveaboards can be challenging, and the fees for mooring, water, and power can be expensive, sometimes comparable to rent or a mortgage. Waitlists for mooring spaces are common, and some locations impose restrictions on liveaboards. It's essential to research the regulations and availability of marinas in your desired area.

Address and Registration

When declaring a boat as your primary residence, you may need to provide an address for various purposes, such as driver's license, insurance, and vehicle registration. You can usually use the marina's address or a post office box, but some institutions may request a physical address.

Tax Implications

Declaring a boat as your primary residence can have tax consequences or benefits. You may be eligible for tax deductions, such as mortgage interest deductions and homestead exemptions for property taxes. However, there may also be capital gains tax considerations when you sell the boat. It's important to consult with a tax professional to understand the specific tax implications for your situation.

Time Spent on the Boat

In some locations, there may be requirements or considerations regarding the amount of time spent on the boat. For example, in the United States, to qualify for certain tax benefits, you must spend at least 30 days a year on the boat.

Cost of living

The cost of living on a boat varies depending on factors such as the size of your boat, the amenities you require, and where you keep your vessel.

Anchorage Fees

If you're lucky enough to find free anchorage in an area where liveaboards are permitted by the local government, this will be the most economical way of living on a boat.

Marina Slip Fees

Marina slips charge daily, weekly, monthly, or long-term fees. They also add a monthly charge for liveaboards since you will be using the marina facilities more than someone storing their boat. Slip fees may or may not include utilities.

Mooring Fees

Mooring fields allow you to secure your boat to a permanent mooring buoy. Moorings typically cost about half the price of a marina slip. Some mooring areas offer additional services such as water taxi, dinghy storage, holding tank pump-outs, and access to onshore facilities.

Maintenance Costs

Maintenance costs for a boat are typically higher than for a house, as boat components require more specific and frequent upkeep. You will need to maintain the living quarters, hull, topsides, underside, canvas, and deck. The marine environment is harsh, especially in areas of direct sunlight. Regular cleaning, polishing, waxing, and zinc replacement are essential to preserving the condition of your boat.

Engine Maintenance

Engine maintenance is another important consideration. You will need to regularly clean and replace fuel, air, and oil filters, as well as inspect and replace zinc components to prevent corrosion.

Utilities

Depending on your location, you may need to pay for utilities such as cable, phone, electricity, water, garbage removal, and sewage removal services.

Boat Insurance

Boat insurance is not required but is highly recommended if you plan to travel outside the marina. The cost of insurance varies depending on the size and value of your boat, your expected boat use, the region you live in, and your motor driving record.

Other Considerations

When creating your budget, keep in mind that you may also need to pay property taxes, especially if you are docked at a marina or slip. Additionally, if you plan to work from your boat, you may need to pay for additional amenities such as internet access.

Sample Budgets

• $2000 for a 35' sailboat in Canada
• $1600 per year for a 40' boat on the Ohio River, plus utilities and maintenance
• $2400 for a 26' boat in Cincinnati, including slip fees, electricity, insurance, bottom cleaning, phone, and laundry
• $1500 for a 40' boat in Vancouver, including insurance and mooring fees
• $1100 on average for a boat in South Florida, with some months as low as $633 and others as high as $4900

Quality of life

Living on a boat can be an attractive option for those seeking a unique lifestyle or looking to save on accommodation costs. However, it's important to consider the potential impact on your quality of life before making the move. Here are some key factors to keep in mind:

Comfort and Space:

Living on a boat, especially a smaller vessel, may present challenges in terms of space and comfort. You'll need to adapt to a more compact living area, which may require downsizing your possessions and getting creative with storage solutions. Ensure the boat has adequate sleeping quarters, headroom, and living space to meet your needs.

Utilities and Amenities:

Access to basic utilities and amenities is essential for a comfortable life. Make sure your boat has permanently installed cooking facilities, a reliable power source, and proper sanitation. This includes a functional toilet with exterior evacuation, which is a requirement in some regions for a boat to qualify as a primary residence.

Mooring and Marina Facilities:

Finding a suitable marina that allows liveaboards can be challenging and often comes with a hefty price tag. Research and compare different marinas in your desired area, considering factors such as mooring fees, water and power availability, and any waitlists for berths. The cost of mooring your boat may even rival that of renting or owning a home onshore.

Maintenance and Upkeep:

Boat ownership comes with regular maintenance requirements. You'll need to stay on top of cleaning, repairs, and periodic maintenance to ensure your vessel is safe and comfortable. This may include tasks like dealing with mildew, maintaining the engine, and ensuring the boat is compliant with local regulations.

Impact on Daily Life:

Living on a boat can present unique logistical challenges. Consider how you'll manage daily tasks like laundry, grocery shopping, and waste disposal. Think about your entertainment and social needs as well—living on a boat may limit your options for hosting guests or accessing recreational facilities.

Weather and Safety:

The marine environment can be unpredictable, and living on a boat may expose you to harsh weather conditions. Ensure your vessel is well-maintained and equipped for adverse weather. Understand the safety protocols and emergency procedures specific to boat living, including evacuation plans in case of a storm or other hazards.

Impact on Wellbeing:

Boat living may offer a sense of freedom and closeness to nature, but it's important to consider the potential impact on your mental and physical health. The confined space and constant motion of a boat may affect your comfort and sense of stability. Ensure you have access to adequate healthcare services and consider how you'll maintain social connections and a support network.

Remember, the quality of life on a boat can vary significantly depending on factors like the size and condition of the vessel, the availability of amenities, and your personal preferences. It's essential to weigh the pros and cons before deciding to make a boat your primary residence.

Frequently asked questions