Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q. Can I live on a yacht and not pay property tax in the U.S.?
A. Those always at sea may be able to avoid property taxes, according to J. Dirk Schwenk, a managing member at Baylaw, a law firm based in Annapolis, Maryland.
“If you really are in motion all the time—touching in ports, but not staying very long—you’re much less likely to be subject to tax as you go,” he said.
But most people have to keep the yacht somewhere. To that end, a boat slip, or the area where the boat is kept, is taxed as property, even though it’s just “an outline of a piece of water,” Mr. Schwenk explained.
“Many locales tax slips as a separate real property if it is in a ‘condo marina,’” he said. “In that case, the slip is sold to the user, as opposed to just leased.”
The condo marina is much like other kinds of condominiums, albeit on water as opposed to on land. It will have an association, and slip owners have rights to the communal elements. There are also annual maintenance fees, Mr. Schwenk added.
“They’re considered a real deeded way to be the owner of that little outlined piece of water,” he said.
The deeded slip is assessed by the local municipality in which it is located, as homes are. Then it is subject to the same property tax rates.
If a boat owner leases the slip, it is taxed as a portion of the value of the marina. Generally the marina pays this tax and the cost is part of the lease price.
In many U.S. states, yachts are also subject to a personal property tax, Mr. Schwenk pointed out.
“Maryland, for example, does not have a personal property tax, but South Carolina and Virginia and a lot of our neighboring states do,” he said.
Although it’s the state governments that allow or don’t allow for the tax, the rates are set on the local level and levies are collected by the county or municipality in which the boat is kept. Read more:
