I'll preface my reply with the following:
Regarding Taxes and Legal Advice, it's always better to discuss with a professional, such as a CPA or a Lawyer. I caution that one should take either from anonymous sources on the internet with a grain of salt.
The Sales Tax Deduction
For boat owners who paid substantial state sales taxes on a new or used boat purchase last year, the Tax Extenders Act of 2008 continues to offer a federal tax deduction for state sales taxes.
Boaters must choose either the state sales tax deduction or state income tax deduction on their federal tax return — you cannot take both.
In addition, to take the state sales tax deduction, the sales tax on a boat purchase must be applied at the same tax rate as the state’s general sales tax. In order to claim the sales tax deduction, tax returns must be itemized. State sales taxes are entered on IRS form Schedule A
The Boat Loan Deduction
For those owners with a secured boat loan, mortgage interest paid on the loan may be deducted from your federal income taxes. Taxpayers may use the home mortgage interest deduction for one second home in addition to their primary home, and must itemize deductions on their returns. A boat is considered a second home for federal tax purposes if it has a galley, an installed head and sleeping berth.
Some boaters may be unaware of this potential tax benefit because not all lending institutions send borrowers an Internal Revenue Service form 1098
which reports the interest paid. Not receiving the form does not preclude taking the deduction. If a 1098 is not available, boaters should contact their lender for the amount of interest paid and should enter it on line 11 on Schedule A along with the lender’s tax ID number. If a form 1098 is sent, boaters should simply enter the amount on line 10 of Schedule A.
If you purchase fuel from a landbased gas station, that fuel includes State
Highway Use Taxes. However, you are not using the fuel on State Roads, therefore you should be able to submit for a refund from the state
where the fuel tax was paid. Determine whether any on-water fuel docks are also including State Tax in the fuel cost. The taxes added for Highway Use can be deducted from the state if used on Off highway use (construction equipment, off road vehicles, boats, planes, etc).