Charter Yacht Ownership as a Tax Deduction

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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.

The key to understanding why 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 are converting it from a personal asset to a business asset. As a charter management business, Nicholson Yachts has witnessed yacht owners reduce the costs of purchasing and owning their yacht by over 50% through a combination of charter income and tax deductions. Savings vary depending on the size of the yacht and the location in which it is placed in charter.

Here is a summary of the tax and income benefits available to the owners of new yachts purchased and placed in charter:

  1. 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.
  2. 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.
  3. You can depreciate the adjusted cost basis of your yacht (the balance of the purchase price after deducting the Section 179 expense deduction and 50% bonus depreciation deduction) over 10 years.
  4. You can deduct against your charter income and other employment income all ordinary and necessary charter related expenses including slip fees, insurance, repairs, loan interest, property tax, etc.
  5. You will receive income from the charter of your yacht, the amount which varies depending on the size of your yacht and the charter company you use.

For more information about owning a yacht or placing a yacht under charter management, please contact Nicholson Yachts at info@nicholsonyachts.com or 401-849-0344

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