New Tax Law Benefits Yacht Owners More than Ever
The recently passed sweeping tax reform—the Tax Cuts and Jobs Act of 2017— include new provisions that can have lucrative benefits for yacht owners and also yachts for Charter that are purchased through and used for legitimate business purposes.
The new bill amended the IRS codes around bonus depreciation and expensing and is in effect through 2022. And one of the biggest changes to the tax code is that, in addition to applying to new boats, the new law now also applies to used boats, meaning brokerage and Charter vessels also qualify.
This means 100% of the purchase price can potentially be written off as bonus depreciation in the year of the purchase if all requirements are met. And there is no dollar limit to the purchase price. That same depreciation applies to any improvements you make to the vessel in the same year as the purchase.
To qualify for these benefits, the buyer must be an entity—corporation, partnership, or LLC—that will use the vessel for a legitimate business purpose. A good example of this is purchasing a yacht and using it for Charter.
Bob Saxon, HMY VP of Charter, Yacht Management & Crew Placement shares his perspective on these new tax benefits and how they relate to chartering: “Having charter managed 2,000+ charter yachts during my career, I can suggest that there are many aspects to be considered from a buyer’s perspective, one of which is the tax advantages. There is also the easing of concerns about offsetting operating expenses as well as issues related to limited owners’ use and putting the yacht to work when the yacht is otherwise idle. Most owners average 8-10 weeks of personal use a year and why not have the yacht working otherwise. When you throw in what might be achieved from the tax standpoint, it makes for an ideal ownership profile. One caveat: Some charter yachts have greater charter potential than others. Discuss these matters with your broker, shoot me an e-mail, or give me a call at 954-224-5307 (mobile) or 954-926-0400 (office), and I can go through the characteristics of what makes a good charter yacht.”
If you’ve ever considered buying a yacht for a business or purchasing a yacht to be placed in a charter fleet, now is the time to take advantage of this new legislative benefit before the end of 2019.
For more information on locating the perfect yacht for your business purposes, talk to an HMY Sales Professional. HMY has 11 marina office locations from Charleston, SC to Ocean Reef, FL.
NOTE: This article is not considered to be official tax advice. Please consult your tax advisor to ensure you’re maximizing these financial benefits.