As you prepare to file 2007 taxes, tax deductions on state and federal levels may still be available. Boat owners may take a deduction for state sales taxes, particularly appropriate for buyers who paid a large amount in sales tax on a new or used boat. Boaters must claim either the state sales tax deduction or state income tax deduction on their federal tax return — not both. To take the sales tax deduction, the sales tax on a boat purchase must be applied at the same rate as a particular state’s general sales tax. Tax returns must be itemized to claim the sales tax deduction. State sales taxes are entered on Schedule A, line 5b of the state form.

For federal tax filing purposes, boats are considered a second home if they have a galley, head and sleeping berth. Therefore, mortgage interest paid on a boat loan is deductible from federal income taxes. Mortgage interest deductions may be taken on one primary home and one second home, and must be itemized on returns. Lending institutions may or may not send borrowers Internal Revenue Service form 1098 reporting the interest paid for the year. If a 1098 is available, the amount of interest should be entered on line 10 of Schedule A on the federal form. In the event a 1098 isn’t available, borrowers should contact their lending institution for the correct amount, and enter it on line 11 on Schedule A with the lender’s tax ID number.

More information about mortgage deductions is available in Publication 936, while more information about state tax deductions is available in Publication 600 — both of which are available at www.irs.gov.