HR7222-119

What This Bill Does

The No Tax on Boat Loan Interest Act of 2026 modifies the applicable passenger vehicle definition in Internal Revenue Code section 163(h)(4)(D). The term would include both applicable motor vehicles and applicable watercraft. Applicable watercraft must be a recreational vessel under title 46, a motorboat under Coast Guard regulations, have original use begin with the taxpayer, and be finally assembled in the United States. The bill keeps a domestic-final-assembly requirement for motor vehicles and adds a parallel domestic-final-assembly requirement for boats. It also updates the taxpayer return rule so taxpayers report the vehicle identification number for applicable motor vehicles or the hull identification number for applicable watercraft. Lender reporting under section 6050AA is updated by inserting hull identifiers alongside vehicle identifiers. The amendments apply to indebtedness incurred after December 31, 2024.

Who Benefits and How

Boat buyers, recreational motorboat purchasers, U.S. boat manufacturers, boat dealers, marine lenders, and coastal or lake-region boating businesses benefit because interest on qualifying U.S.-assembled recreational motorboat loans can receive the same passenger-vehicle interest treatment as covered vehicles. Domestic boat manufacturers benefit from the final-assembly requirement, which excludes foreign-assembled vessels from the tax preference.

Who Bears the Burden and How

Federal revenue collections, IRS forms staff, tax preparers, marine lenders, boat buyers claiming the deduction, and foreign boat manufacturers face new tax costs, identifier reporting, hull-number tracking, lender reporting, eligibility documentation, and competitive effects. Buyers of foreign-assembled boats do not receive the same treatment, and taxpayers must prove the vessel is a qualifying recreational motorboat with U.S. final assembly.

Key Provisions

• Expands applicable passenger vehicle rules to include applicable watercraft.
• Defines applicable watercraft as a recreational motorboat whose original use begins with the taxpayer.
• Requires final assembly in the United States for qualifying watercraft.
• Requires taxpayers to report a vehicle identification number or hull identification number on the return.
• Updates lender reporting to include hull identifiers.
• Applies the changes to indebtedness incurred after December 31, 2024.