Tax Deductions for Charter Yacht Ownership
Section 179 of the IRS code is a topic worth knowing about. While Nicholson Yachts is not a tax advisor, we do work with owners who benefit from tax deductions. As the original yacht charter company, Nicholson Yachts was founded in 1949. Due to our decades of experience, we have a reputation for solid yacht management. Yacht management services for charter yacht owners is a service we provide on a daily basis.
Owning a new yacht is a marvelous experience that shouldn’t be diminished by the difficulty of paying for it. For years, yacht buyers have structured their ownership in a legitimate manner that allows them to write-off the purchase price of the yacht and deduct most ownership expenses against their employment income.
How it works
The reason yachts placed in charter can generate significant tax benefits is that these are the same tax benefits available to businesses for the purchase of business equipment. When you place your yacht in a charter management program, you then convert the boat from a personal asset to a business asset. Because we are a charter management business, we see yacht owners reduce the costs of buying and owning a yacht. In some cases by over 50% as a result of charter income and tax deductions. Savings will vary depending on the size of the yacht and the location in which it is placed in charter.
Summary of benefits
Below is a brief summary of the tax and income benefits available to the owners of new yachts purchased and placed in charter. Remember, tax laws can and do change. Therefore it is important to work with a professional tax advisor for current information.
- Under Section 179 of the Internal Revenue Code, you can take a one-time expense deduction in the year of purchase equal to the purchase price of your yacht up to a maximum deduction of $500,000.
- You may also take a bonus depreciation deduction in the year of purchase of 50% of the amount of the purchase price over $500,000.
- The owner can depreciate the adjusted cost basis of your yacht over 10 years. (Cost basis is the balance of the purchase price after deducting the Section 179 expense deduction and 50% bonus depreciation deduction)
- You can deduct against your charter income and other employment income all ordinary and necessary charter related expenses. These include slip fees, insurance, repairs, loan interest, property tax, etc.
- The owner will receive income from the charter of the yacht. The amount varies depending on the size of your yacht and the charter company used.
For more information
Contact us for more information about yacht ownership or placing a boat under yacht charter management. The team at Nicholson Yachts is available at [email protected] or 401-849-0344.
IMPORTANT: Nicholson Yachts does not provide tax advice. However, we do provide yacht charter management services to yacht owners. Therefore we are able to discuss the topic tax deduction in the context of our areas of expertise.
This post was updated April 13, 2021