Second home tax deductions: Boaters on edge with AB 71
June 8, 2017
Proposal to eliminate benefit could be costly to boat owners, but will the bill make it to governor’s desk?
STATEWIDE — Taxes – if you believe the group of people we identify as “they” – is one of two guarantees in life. Some would argue death, life’s other guarantee, might as well be applied to California’s boating public based on the way state officials and policymakers have been handling tax policy of late.
More specifically: would the elimination of tax deductions on second homes result in diminished boating activity in California?
The recent enactment of Senate Bill 1 (SB 1) already raised the specter of diminished boating activity due to tax policy. SB 1, as we reported here in this issue of The Log, applies a gasoline tax hike to all boaters fueling up at California gas stations and fuel docks.
Removing tax deductions for second homes would likely increase a boater’s exposure to Uncle Sam, opening the door for prospective boat buyers – whether first-timers or repeat customers – to second-guess being on the market to purchase a vessel.
The natural instinct would be to politicize the issue, but doing so would take away from having a genuine conversation on finding ways to address – and solve – some of California’s most pressing issues.
Let’s take Assembly Bill 71 (AB 71) for example. Assembly member David Chiu, D-San Francisco, introduced AB 71 in this legislative session in hopes of shoring up some funds to address California’s rising real estate costs. Purchasing or renting a home in any of California’s major population centers is becoming increasingly difficult, giving greater value to formal affordable housing initiatives and programs.
A boat could qualify as a second home under AB 71.
“The deductions are limited to $1 million or less in mortgages used to buy, build, or improve the home. This limitation applies to the combined mortgages of the first and second home,” a legislative analysis of AB 71 stated.
Chiu proposed the elimination of tax deductions for second homes as a means to increase revenue for California’s affordable housing initiatives – no different than policymakers justifying the enactment of SB 1 to help raise enough money to fix our aging roads.
It’s not unfair to question whether the reasoning behind bills such as AB 71 or SB 1 are genuine, but let’s be frank: California’s roads are in desperate need of repair and housing is becoming less and less affordable.
These problems are not going away with the flick of a magic wand. The money to address these issues – and many others – has to come from somewhere. It’s just a matter of figuring out how boaters can pay their fair share without being discouraged from actually boating.
AB 71, for example, proposes to use tax revenues from California’s second-home owners (and boat owners) to leverage $1 billion of federal resources for affordable housing programs in the state.
Part of the problem here, obviously, is the perception society-at-large might have of boaters. Someone who can afford to pay for a landside dwelling and a vessel certainly has the funds to be on the hook for a higher tax liability.
However boaters can point to a National Marine Manufacturers Association (NMMA) policy brief issued a few years ago to debunk such perceptions. The policy brief specifically stated about 79 percent of boaters are middle-class and have an annual household income of less than $100,000. The average boat price in 2010, according to NMMA, was $16,517 – roughly the same cost as a mid-sized sedan from one of the major auto manufacturers.
Increasing the tax exposure on a boat owner with an annual household income of less than $100,000 would certainly sting his or her wallet – and perhaps a disincentive to future boating purchases.
Boating advocacy groups are obviously paying close attention to AB 71’s progress through the legislature. Groups such as California Sportfishing League and Recreational Boaters of California, for example, opposed Chiu’s proposal. Legislators voted mostly on party lines as AB 71 moved through two Assembly committees in early March and mid May.
There are no indications either way – as of yet – of whether AB 71 would make it to the governor’s desk or instead die before it ever gets to a vote. Accordingly there is still time to contact your local legislator and let them know your thoughts on AB 71.
Would the added tax exposure prevent you from buying a boat? Or is a bill like AB 71 necessary for the sake of affordable housing? Is there another way to increase state revenues for affordable housing initiatives without eliminating mortgage deductions for second homes?
How about California government not stealing money thereby not need to take boat owners write-off?
A court ruled late Friday that California is obligated to return $331 million that it took from a fund designated to help troubled borrowers but instead used to plug holes in the state’s budget.
The Commies are at it again.
They are just pushing productive people out of the state.
Soon it will be the Ultra Rich and the peon welfare class.
The Democrat’s are truly Idiots in action.
Damn right..Pinkos at it again
I’m a Conservative however, the idea of getting a tax “loophole” for calling a boat a “second home” is not something I agree with. The article definitely presents a lot of ‘alternate facts’, such as the average boat purchase price being $16,517. Obviously this would not be considered a live aboard boat. There is one area of taxation that is definitely a huge rip-off for all income levels: The tax that slip renters have to pay annually. This is a “property tax based on the valuation of the slip/space, and is imposed on whomever occupied that slip on January 1st. of each year. I can’t imagine how this outrageous tax has been accepted by the hundreds of thousands of slip renters. I know it has been challenged in the past, however, it never received much, if any publicity—thus it died on the vine. This is no different than a home or apartment renter being taxed on the value of his rental. Also, even more egregious, the slip renter could be there on Jan. 1st. and move out the next month, and will still be taxed for the whole year. What about the ‘Guest slips’? Which one of them gets taxed? Talk about “taxation without representation”. This is what the ‘Tea Party’ was all about. Apparently we are a different culture today—and, simply accept this sort of thing.
Well worded
La county bad enough
OC county much worse
How bout a big thank you to all of us that kept you afloat during the last recession
Mitch Schroeder
Multi boat owner
To qualify for the second home deduction it must have a head, place to sleep and a place to cook. I have worked hard to pay the mortgage on my floating condo and the deduction played a huge role in affordability.i have no desire to work to subzidize affordable housing in California.
The tax is based on the value of the vessel based on where the vessel has a slip on Jan 1 every year whether it is in the slip or not. It is a property tax bill.
Here is another example of California trying to pay for their incompetence and mismanagement by finding ways to increase tax liabilities on anyone who can be considered to be reasonably successful. So the message being sent is if you work hard and by so doing, can afford to have some enjoyable things in life as a result of hard work and dedication, you should be taxed more to pay for the derelicts and illegal aliens in the state. California has sought to become a socialist state uder the current politicians and yet the Democrat majority keeps winning. Come on my fellow republicans, let’s get some unity and get to the polls at election time. Let’s end this abuse and corruption.