Do you pay taxes if you live on a boat?
30 September 2022
Are you obligated to pay taxes if you live on something like a boat?
In this world, only death and taxes may be said to be certain, according to Benjamin Franklin’s famous quote. Humans haven’t figured out how to avoid death, but they have devised several ways to reduce their tax burden. A rising number of people are deciding to do just that by selling their homes and relocating to boats. So, if you live on a boat, do you have to pay taxes? Yes, paying taxes is still required if you live on a boat. However, there are strategies to reduce your tax burden and numerous tax benefits of living aboard a boat.
Typical Taxes Boat Owners Must Pay
Owners of boats and yachts cannot completely avoid paying taxes. Boat owners, especially those who want to live on their yachts, pay four primary forms of taxes.
Owners must pay the sales tax when they buy a boat. Since there is no federal sales tax imposed on the purchase of a boat, a sales tax is often a state or local tax. Usually, just a fraction of the vessel’s selling price is subject to a state sales tax. Although sales taxes are sometimes regulated at a set amount, other states have flat rates. A tiny additional percentage of local sales tax can be imposed, depending on the county or municipality where you bought the boat.
Personal property taxes – Once you’ve paid for the boat and acquired ownership of it, you could need to make yearly payments toward a personal property tax. Similar to the personal property tax that RV and private jet owners must pay. Personal property taxes are not applied in several states. You will need to establish a base in one of those tax havens if you plan to live on a yacht and avoid paying personal property taxes.
Property taxes must be paid on a boat slip by anyone who docks a liveaboard vessel. If you have a boat slip that was deeded to you, it will be valued by the neighbourhood municipality and taxed at the same rates as houses. Property taxes are typically included in the monthly lease fee when renting a boat slip. When residing aboard a boat, there are ways to avoid paying property taxes. You are less likely to be liable for property taxes if your vessel is constantly at sea and rarely docks.