To get a character or item to “sink down” into the water you simply erase the parts you submerged. Smudge the edges to make a softer transition. You can also use your lasso tool and mark out the area you want to have under the water, feather your selection for a smooth edge and delete.
If you want to add a reflection of your character/item on the water, make a copy of you item and paste it on a new layer. Flip it and place it under your item. Use motion blur to smooth out the item and turn down the opacity.
