“There’s never been a better time to buy a boat than right now.” Anyone that has ever talked with a boat dealer or a yacht broker has probably heard that phrase and it’s true from an emotional standpoint. But from now until 2022, there may be some legitimacy to that statement from a financial viewpoint as well. New tax laws that went into effect at the beginning of 2018 now allow any entity (meaning a corporation or LLC) purchasing a new or used boat to deduct 100% of the amount of the purchase price, as long as it is used for business purposes. (See Section 179)
New electronics, engine upgrades, adding a Seakeeper gyro, and any other enhancements to the “equipment” can also be written off. These advantages have made buying a boat more palatable for those who wish to use it for business purposes like luxury yacht charter vacations or for high-end fishing charter boats. “We’ve had a few customers come in and inquire about buying a Viking Yacht to put into their charter fishing business in time for season,” said Frank Bongiorno, President of Staten Island Yacht Sales. “We advise everyone who asks about it to talk to a professional tax adviser just to make sure all of the details are covered. But what an incentive to buy a boat right now!”
Here is a recap of the new tax provisions for writing off your boat purchase:
· The boat buyer must be a business entity like an LLC, partnership, or corporation
· You can deduct the FULL purchase price of your boat or yacht
· The boat you purchase must be used for business at least 50% of the time
· The boat can be new or pre-owned as long as it is “new to you”
· Equipment upgrades like electronics or a gyro can be written off in the same year
· The write-off is not limited to the taxable income of the entity
If properly structured, the entity purchasing the boat can generate a deductible loss from their flow-through charter business that can be used to offset ordinary taxable income from other sources, as long as it is done in the same year as the boat purchase.
All of the recent changes to the tax code has made it very enticing for those on the fence about buying a new boat to make the jump. Hiring a captain to run your charter fishing business, or joining a charter management company to maintain your luxury motor yacht on a consistent basis, can take much of the hassle out of owning a yacht for business purposes. Yachts in charter fleets are typically well cared for, cleaned weekly, and are maintained to be ready at a moment’s notice for booking. So if the cost of ownership is a pain-point in your boating plans, the tax advantages for the next few years and the benefits of being part of a charter management company, may be enough to make now the best time to buy that boat.
This story is contributed by Rob Bowman from Bowman Marketing (LinkedIn.com). Rob reports on the sportfishing yachts, trends with luxury motor yachts, and new advancements with long-distance cruising yachts.
Photos of Deduct Your Yacht Purchase as a Tax Write-Off
