Buying a Superyacht? Learn More About These Tax Benefits
With the global pandemic came an increased demand for yachts, both buying and chartering, as the benefits of being outside on the water became even more attractive during a time of social distancing.
Whether you’re an experienced owner or have just purchased your first boat, being a yacht owner is exciting. But owning a yacht, and especially a superyacht, also means completing several important financial tasks, the logistics of which you should become intimately familiar with before embarking on your first voyage. It’s important to know the tax and financial benefits that are available to you to maximize the ROI and reduce the tax burden of your luxury investment.
This means keeping up with the latest changes to tax codes, depreciation information, and knowing how to take advantage of both to realize their benefits. We know it can be a lot of complicated information to juggle and understand. To help you through it all, we highly recommend you have a good tax advisor on hand who does this for a living, and can provide specific intelligence about the IRS 179 tax deduction. For now, here’s a quick primer.
The Basics: IRS 179 Deduction
For superyacht owners, a recent tax code change can bring major benefits. IRS 179 already allows you to deduct the full purchase price of qualifying equipment from your gross income. But that number has even more recently been increased, meaning you could get more out of the deduction than you might have expected.
The maximum deduction applicable to tax code 179 is $1 million, with a phase out threshold currently capped at $2.5 million. Adjusted for inflation, this new law also allows business owners to include improvements made to their properties after 2017.
What does this actually mean?
You can declare your superyacht as your own personal business, lowering your current-year tax liability without capitalizing it as an asset, and preventing it from depreciating in the future.
Even though tax code 179 can be a great benefit, there are some rules to keep in mind. For one thing, the maximum amount of deduction you can elect is $1 million. Also, your yacht must be used for 50% of business services to qualify for deduction.
Individual pieces of equipment on the yacht may also be deductible, but it’s important to make note of any improvements or additions that have been made to the boat. They all must qualify for deduction under specification written in the IRS 179 tax code and purchase prices must fall within the amount ranges stated within the code.
- Key Points
Tax code 179 is an incentive for small business owners (such as sportfishing captains), but superyacht owners who charter their vessels can certainly take advantage of its benefits. Keep good records, know what qualifies and what doesn't, and, again, work with a good tax advisor to figure out if you may be missing something.
- Accelerated Depreciation
Your yacht must have been acquired after September 27, 2017 and, currently, this rule will apply to yachts purchased before January 1, 2023. This means that your yacht’s entire purchase price could be written off as a bonus depreciation. This would apply in the year of purchase given all requirements are met.
Buy Your Next Tax Busting Superyacht Through HMY!
HMY continues to be one of the oldest and leading yacht brokerages in the United States. Whether you want to expand your charter business, enjoy sport fishing, or simply aim to travel, HMY has a yacht for you! Our experienced professionals are here to help you through every step of the decision-making process. Embark on the expedition of your dreams with our fantastic collection of superyachts!
To inquire about our services, please contact one of our HMY Sales Professionals at 561-262-4132 or search now through our beautiful selection of superyachts.
NOTE: This article is not considered to be official tax advice. Please consult your tax advisor to ensure you’re maximizing these financial benefits.