Staff who work on the boat and in the house: payroll, employers, and the boat's tax records

Some families with a boat have staff who move between the house and the vessel: a household manager who comes aboard for the summer, a chef who cooks at home and at sea, or crew who help at the house in the off season. The work is continuous for the employee. For tax purposes it can involve two employers, two sets of rules, and a boat whose own records depend on how its use is split between the family and any charter guests.

This post covers the tax and payroll questions when staff work both on a family's boat and at its homes: who the employer is, how crew wages are treated, how personal and charter use affect the boat's records, and when a boat counts as a residence for mortgage interest. It does not cover buying, crewing, or running a boat, it does not evaluate any vessel or management company, and it is not maritime or employment law advice. Those questions belong to maritime counsel and the boat's management company.

Who employs the crew?

Boats are often owned by an LLC or other entity, and crew are often employed by a management company or crewing agency rather than by the owner. Three common arrangements:

• Management company or crewing agency as employer. The company employs the crew, runs payroll, and bills the owner. Crew on foreign-flagged vessels are often employed by a non-U.S. company under foreign contracts.
• Vessel-owning entity as employer. The LLC that owns the boat employs the crew directly and files its own payroll returns.
• The family as employer. Less common for full-time crew, but it happens with small boats and part-time help.

A household employee who also works aboard may therefore have two employers: the household for the house work and a management company or vessel LLC for the boat work. Each employer reports its own wages. Running all of the person's pay through the household when the boat entity directs the boat work, or the reverse, puts wages on the wrong return.

Crew wages and withholding

Wages of crew members are subject to some special rules:

• Federal income tax withholding. Section 3401(a)(17) excludes from federal income tax withholding the wages of crew members on vessels engaged in foreign, coastwise, intercoastal, or interstate commerce. Whether a privately used yacht qualifies depends on its operations, so ask the preparer and counsel rather than assuming. An exemption from withholding is not an exemption from tax. U.S. citizens and resident aliens owe U.S. income tax on worldwide income whether or not tax was withheld, so crew whose boat wages are not withheld should plan quarterly estimated payments on Form 1040-ES. The foreign earned income exclusion may reduce that tax only if the crew member meets its tests.
• Social Security and Medicare. These generally apply to a U.S. employer's crew on an American vessel. Work on a foreign-flagged vessel has its own rules that depend on where the work is done, the employer, and the crew member's citizenship.
• State withholding. Federal law limits states' ability to require withholding from certain seamen's wages. The rules are narrow, and the facts decide them.
• Records. Crew lists, contracts, and pay records should show which days each person worked aboard and which days at the house.

The off season: crew who work at the house

The reverse case is common too. When the boat is laid up, a deckhand or engineer employed by the management company may help at the family's home: moving furniture, maintaining a dock, or driving. If the management company bills the family for that time, the company remains the employer, but the cost is a personal household expense, not a boat expense, and it should not be coded to the boat's books. If the family pays the crew member directly for house work, the family may be a household employer for those wages, and the $3,000 Schedule H threshold for 2026 applies to what the family pays. Either way, the work at the house needs its own record, separate from the boat's crew records.

Personal use, charter use, and the boat's books

If the boat is chartered to others part of the year, its tax treatment depends on the split between charter and personal use:

• Charter income is reported by whoever owns the boat or runs the charter activity, often the vessel LLC.
• Expenses (crew, fuel, dockage, insurance, maintenance, depreciation) are divided between charter and personal use. Personal use days by the family, and below-market use by friends, count as personal.
• Whether the activity is a business. A boat that is chartered occasionally may be an activity not engaged in for profit under Section 183, which limits deductions. Even when it is a business, the passive activity rules and, for vessels with sleeping, cooking, and toilet facilities, the Section 280A vacation home rules can limit losses.
• Entertainment facilities. Deductions for facilities used for entertainment are generally disallowed under Section 274, and a yacht used for entertaining business guests does not create a deduction for that use.

Staff wages follow the same split. A chef who cooks for charter guests and for the family works partly for the charter activity and partly personally.

The boat as a residence

A boat with sleeping, cooking, and toilet facilities can qualify as a residence. If it is the family's designated second home, interest on a loan secured by the boat can be qualified residence interest, within the $750,000 acquisition debt limit for 2026 shared with the main home. The loan must be secured by the boat. If the boat is the second home, a separate vacation house cannot also be.

Sales and use tax, briefly

Boats moved into a state after purchase can trigger use tax in that state, sometimes with exemptions for limited days in state waters or for vessels used in charter. The rules vary widely and have deadlines. Keep the purchase documents, the boat's location log, and any exemption certificates with the boat's tax file.

The boat's tax file

Whoever owns the boat should keep, by year:

• Purchase documents, financing, and title or documentation records
• Location and use log: days aboard by the family, guests, and charter, with ports
• Charter agreements and income records
• Crew contracts, employer of record, and payroll reports
• Invoices coded by category, with the personal and charter split
• Sales and use tax filings and exemption certificates

Ask the management company for

Its payroll reports by crew member, the employer of record for each, the days each person worked aboard, and how it treated withholding. Your preparer needs these to match the household's own payroll.

The scored diagnostic

Score each item 0, 1, or 2. Zero means missing. One means partial. Two means current and documented.

Item	0, 1, or 2
The employer for boat work and for house work is identified for each staff member
Days aboard and days at the house are recorded for staff who do both
Crew withholding treatment was reviewed with the preparer
Personal and charter use days are logged
Expenses are split between personal and charter use
The second home designation, if the boat is one, is documented
Use tax status in each state is documented
The boat's tax file is kept by year

A total of 13 to 16 means the boat and the household payroll should agree. A total of 8 to 12 means wages or deductions may be on the wrong return. Below 8, review with your preparer before the next season.

Illustrative: a chef aboard for the summer

Illustrative: A family's household chef, employed through household payroll, joins their boat from June through August 2026. The boat is owned by an LLC and crewed by a management company, which charters the boat for 30 days that summer. During the summer, the chef is put on the management company's crew payroll for the boat work, and the household payroll pays for the days the chef cooks at the house. The chef receives two W-2s for 2026. The LLC's books allocate the chef's boat wages between charter days and family days. The household's Schedule H covers only the house wages.

Who owns what

• The family: use logs and the decision about who employs staff for each kind of work.
• The management company: crew payroll, contracts, and the boat's operating records.
• Your preparer: charter versus personal allocation, residence interest, and the household's Schedule H.
• Maritime counsel: crew contracts, flag, and state use tax questions.

Next step: if any household staff worked aboard in 2026, list their days aboard and the employer for those days, and give the list to your preparer and the boat's management company.

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Educational only. This is not tax or legal advice for your situation. Consult your own CPA, EA, or attorney before acting.