Please note that this article is only applicable for US tax paying individuals and entities.
When considering a luxury yacht purchase the financial benefits are often overlooked.
It's crucial to remember several tax considerations that, depending on how you use or intend to you use your yacht, you may well been entitled to.
The Tax Cuts and Jobs Act (TCJA), which was passed in 2017, ended up making yacht owners one of the major gainers from this tax reform. The three primary changes brought about by this legislation will be covered in this brief article: bonus depreciation, deductions, and expenses.
Please get in contact with Barton Yachts if you have any questions about any of the information in this article. Whether it’s for a future luxury yacht purchase or a vessel you currently own, one of our brokers will be pleased to put you in touch with one of our tax experts who can help you further.
Does your yacht qualify for special tax treatment?
Your current or future luxury yacht purchase must be through/owned by a registered entity (LLC, partnership, or corporation) and utilised for "legitimate business operations" to benefit from the amendments made by the TCJA. This typically means that in order to satisfy the legitimate business purpose criterion, the yacht must be chartered for at least 50% of the time it is in use.
The vessel is regarded by the IRS as "listed" property and a business asset if these conditions are satisfied.
3 Changes brought by The Tax Cuts and Jobs Act (TCJA)
Bonus Depreciation
The bonus depreciation for boats was enhanced by the TCJA from 50%to 100%, with no cash cap. Although the 100% bonus depreciation was no longer available after 2022, owners are still permitted to deduct 80% of the yacht's total purchase price in the year of purchase with no cash cap.
This guideline is valid for both new and pre-owned luxury yacht purchases.
Deductions
You might also be qualified to deduct the state and local sales taxes paid on the vessel's purchase price, depending on the state in which you reside.
It might be possible to deduct the interest on the loan if your acquisition was or will be financed and you categorise your yacht as a second house (to qualify, it must contain a sleeping berth, a galley, and a head).Your yacht's mortgage might be regarded as a second home mortgage under theTCJA, which would permit a deduction of up to $750,000 and classify qualified vessels as "listed property."
Expenses
You can write off 50% of the costs related to the yacht, such as fuel, maintenance, dockage fees, insurance, and repairs, if you charter out your yacht for more than 50% of its time.
Yacht owners can gain a lot from all these changes, which will help them maximise ROI (return on investment) on their asset more promptly.
Make sure to seek the advice of a tax expert and ensure that accurate documents are kept to take advantage of these adjustments.
One of our brokers will be available to help you in all aspects of the purchase or rental of your yacht. Barton Yachts are eager to ensure you make the most out of your luxury yacht purchase.