Boat loan interest deduction: when a boat counts as a second home

IRS Publication 936, the 2025 edition, counts a boat as a home if it “has sleeping, cooking, and toilet facilities.” If your loan is secured by that boat and it qualifies as your main or second home, the interest can be treated as home mortgage interest, within the $750,000 debt limit ($375,000 if married filing separately). This page explains the rules; it isn’t tax advice.

What the IRS says, word for word

From Publication 936 (2025), Home Mortgage Interest Deduction, the edition “for use in preparing 2025 Returns.” As of October 24, 2026, the IRS had not posted a 2026 edition; the page was last reviewed or updated April 30, 2026.

“For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.”

Three conditions sit in those sentences, and a boat loan has to clear all of them:

1. The debt is secured by the boat. A secured boat loan or a preferred ship mortgage is secured by the boat. An unsecured loan, such as LightStream’s unsecured boat loan, isn’t secured by anything, so it doesn’t meet the first condition as the publication words it.
2. The boat is your main home or your second home.
3. The boat has sleeping, cooking and toilet facilities. Trident Funding’s FAQ puts it in boat terms: a sleeping berth, a galley and a head. A boat without all three isn’t a home under that definition.

The second-home rules

Most boat owners who look at this deduction are looking at the second-home rules, since a recreational boat isn’t the main home. Lenders also limit use: Navy Federal says boats it finances “must be used for recreational purposes,” and Trident Funding says it doesn’t finance liveaboards.

If you don’t rent the boat out. Publication 936: “If you have a second home that you don’t hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You don’t have to use the home during the year.”

If you do rent it out. The rule changes: “You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer.” Charter income brings in this test, and a boat that fails it isn’t a qualified home for that year. Rental use also raises other tax questions outside this publication, which is one more reason to take a chartered boat to a tax professional.

If you have more than one second home. You “can treat only one as the qualified second home during any year.” A lake house and a boat with a galley and berth compete for the same slot; you pick one for the year.

The debt limits

Publication 936 (2025): “You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.”

If you already carry a mortgage on your house, ask your tax preparer how that debt and a boat loan count together against the limit. On a large yacht loan, the loan alone can be bigger than $750,000.

A rough sense of the interest involved

For scale, here’s the first-year interest on an example loan. The figures are an example, not a quote:

• Purchase price $500,000, down payment $100,000, $400,000 financed
• APR 8.00% (the calculator’s placeholder), 20-year term, fully paid off, no balloon
• Payment $3,345.76 a month

Interest in the first 12 months on that loan comes to $31,694.46. Whether any of it is deductible depends on everything above plus the rest of your tax return. The calculator shows the interest over the term for your own numbers.

What this means when you’re comparing loans

The tax treatment can change which loan is cheaper for you, but only your tax preparer can say by how much. A few practical points:

• If the deduction matters to you, choose a loan secured by the boat. The used boat loans guide covers the unsecured option and why some buyers use it anyway.
• Keep records that show the boat has sleeping, cooking and toilet facilities, such as the listing and the marine survey report.
• If you plan to charter, talk to a tax professional before you buy, not after.

The rules above are quoted from the 2025 edition of Publication 936 and can change with the next edition or new law, so take your own facts to a CPA or enrolled agent. For the loan side, the published lender terms and how long you can finance a boat cover what lenders offer.