Are You Using Your Yacht as a Tax Deduction?

Are You Using Your Yacht as a Tax Deduction?

Tax Deductions

Who doesn’t like spending time out on the open waters enjoying all the many luxuries that yachts have to offer? While most people only dream of owning a yacht, for many of the world’s ultra-wealthy having a yacht is like having a second car: it’s a standard more than a luxury. However, although yacht owners are in different ways to reduce taxable income class than most, that doesn’t mean that purchasing and owning a yacht tax deduction is cheap. In fact, it is quite expensive. The good news is, you can actually lower the cost of owning a yacht significantly if you play your cards right.

Chartering Your Yacht

As many yacht owners know, it just takes a little prudence to make your yacht work for you. The first thing you need to do is place your yacht in charter. That doesn’t mean you have to put in some foreign charter company, where you will rarely have the chance to use it. You can actually place it in a local charter company in a location that is convenient for you. By chartering your yacht, essentially, you are allowing a charter company to charter, or rent your vessel to other sailors by the day or week. It’s similar to owning a vacation home and renting it out most of the year. So, in essence, you are turning your yacht into a business.

Tax-Saving Implications

When you decide to use your yacht as a business you are eligible for several tax management, savings,  which are basically the same benefits that business owners get when they buy equipment for their business. When your yacht is placed into charter it becomes a business asset and is no longer considered a personal asset. Many yacht owners are actually able to reduce the cost of buying and owning a yacht by more than half. That is a significant saving, and you still get to enjoy the yacht for personal use as well. There are several others to pay less taxes implications that also exist, including:

Being able to take a one-time maximum deduction of up to $500,000 of the purchase price of the yacht in the year that you buy it, according to Section 179 of the Internal Revenue Code. If the purchase price exceeds $2,000,000, the benefit is reduced.
A bonus depreciation deduction of half of the purchase price over $500,000 during the year of purchase.

Being able to depreciate the adjusted cost basis of your yacht – which is the balance of the purchase price after the Section 179 expense deduction and the 50% bonus depreciation deduction – over 10 years.

Deducting against how to reduce taxable income and other employment income, as well as typical charter related expenses including insurance, slip fees, loan interest, repairs and property tax return, deduction, etc.
More income from chartering your yacht, which will vary depending on your yacht’s size and the charter company you select.

Contact GROCO for Tax Savings

Of course, if you are considering placing your yacht in the charter for tax rates 2020 purposes, then you should first consult with a certified tax accountant. At GROCO we can help answer all your tax questions regarding purchasing and owning a yacht and placing it in the charter. Please contact us today at 1-877-CPA-2006 or click here to connect with us online.

We hope you found this article about “Are You Using Your Yacht as a Tax Deduction?” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

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