FAQ - Frequently Asked Questions about U. S. Coast Guard Documentation (Kentucky)

Why should I document my boat? The change (1999) in Kentucky State law reduces the State portion of annual property tax from $4.50 /thousand of value to $.15 /thousand for federally documented boats. Another way to figure is that you save taxes of $435 per hundred thousand of boat value, every year. Combined with the other taxes on your property tax bill the annual savings is 40% of your total property tax. You also save the annual license and registration fees that most people pay in April. Your tax will be due in December of the year after your purchase.

What is "documentation"? Documentation is the federal form of titling. Federal law requires any undocumented vessel equipped with a motor to be "numbered in the State where it is principally operated" (the normal titling and registration for Kentucky boats). Federal registration is required for vessels in certain trades (commercial use). For vessels used exclusively for recreational purposes, the owner may choose. This is for you.

What is the procedure to document my boat? While the application process can be somewhat complex, we can process the paperwork for you. You merely complete a data sheet so that the forms can be processed for signature. The one-time charge is $326 for processing and Coast Guard fees. There is an additional charge if a lien is needed, as this requires a Preferred Ship Mortgage to be filed.

When should I apply? If your boat is titled in Kentucky, State taxes are assessed on January 1 of each year and normally paid when you renew your registration in April. Therefore, the documentation must be completed before January 1 to reduce your taxes for next year. For new boats, the first tax bill (other than the sales tax when you buy the boat) will be assessed on January 1. The normal procedure is to begin the process of documentation at the time of purchase so that no state titling is required.

How long does the process take? The Certificate of Documentation (federal title) is normally returned by the Coast Guard within about 8 weeks. If your boat was already titled in Kentucky you must then get your boat removed from State records by turning in your State title to your County Clerk's office (he will require a photocopy of your Certificate of Documentation). You also should remove the State numbers and registration stickers.

Will I still have to register my boat and pay State and local taxes? You will no longer be registering your boat and paying taxes in April of each year. However, you are obligated to file a Tangible Personal Property tax return (there's a special one page State form for documented boats) by May 15 of each year after you purchase your boat. Your reduced tax bill arrives in November for payment by December 31, much like real estate property taxes. Since the property is in Kentucky, living in another state does not relieve you of this obligation.

After I document my boat what do I have to do? You must mark your vessel with its name and hailing port. The assigned documentation number must be affixed to the interior of the hull. The Certificate must be maintained on the vessel and an updated replacement is mailed to you each year, but there is no further charge. Of course, in order for the Coast Guard to mail that to you, you must keep them informed of any change in address. Information and directions are provided with your Certificate.

How could documentation help me with financing or insuring my boat? Because this is a federal documentation, a bank or insurance company regards the vessel as a more secure form of collateral than if state titled. In fact, some institutions specifically require federal documentation and filing of a "preferred ship mortgage".

Why should I NOT document my boat? If you plan to sell your boat in a year or two, or move it to another state, you may not want to go through the procedure. In addition to the application costs, there is a cost, depending on how you do it, to mark your boat with its official number, name and hailing port. Additionally, if your boat is valued at less than $70,000 it will take more than one year to be cost effective in tax savings.

What if I sell my boat? There is a federal Bill of Sale form you complete as the seller. The buyer uses that and an Application for Exchange of Documentation. There is a fee for filing (similar but less than the original filing fee). This is paid by the buyer. Additionally, if there is a lien against the boat, it must be satisfied before transfer.

 


Hughes Documentation Service
64 Fourth St., C206 Bonita Springs, FL 34134

239-948-2464

ED HUGHES, Federal Documentation Specialist

CGDOC99@Hotmail.com

 

*Ed Hughes is well known on Lake Cumberland, where he has worked for many years.
He is very familiar with Kentucky property tax laws, and U.S. Coast Guard documentation requirements, and has done hundreds of  documentations over the years.
He can answer any questions you may have.