Your Next New or Pre-Owned Boat Purchase Could be a Complete Tax Write Off!

If you have, or are interested in, a boat-based business but have been on the fence about your next purchase, it’s time to quit procrastinating and find the next yacht for your operation. In the 2018 tax legislation, there are new provisions which could provide substantial federal tax benefits to purchasers of boats, both new and pre-owned, through 2022. Bluewater Partner, Dan Reitz helps break down the new tax code so it’s easily digestible.

To qualify for these benefits, the buyer must be an entity (corporation, partnership or LLC) that will rent or charter the vessel or use it for another legitimate business purpose. So long as that requirement is met, then 100% of the purchase price can be written off as “bonus depreciation” in the year of the purchase.

Tax depreciation write-offs will apply to both yacht purchases and major upgrades

Another benefit of this new tax provision is that there is no dollar limit on the purchase price! The bonus depreciation write-off also applies to any improvements made to the boat, or equipment purchased, so long as it’s within the same calendar year of the vessel’s purchase. Bluewater President Jan Boone explains, “so don’t hold back on upgrading the electronics or installing a Seakeeper gyro with our service yard experts – these items can also be written off with the purchase of your next boat.”

One important feature of the bonus depreciation write-off rule is that it is not limited to the taxable income of the purchasing entity. So, if properly structured, a buyer may generate a deductible loss from their flow-through charter entity (in the year of a boat purchase) that can be used to directly offset ordinary taxable income they have from other sources.

A Recap of the New Tax Provisions for Boat Buyers

  • To qualify, the boat owner must be an entity
  • New provisions apply to new & pre-owned purchases
  • Write-off 100% of the purchase price with no limits
  • New equipment & upgrades can be written off in the same year
  • Write-off not limited to taxable income of entity

This is a very significant tax benefit, and the Bluewater team is here to help answer your questions related to the new provisions as you begin searching for your next new boat. Additionally, we urge you to consult with your own tax advisor to consider the complexities of your whole tax picture and the potential of this new tax benefit. Now it’s time to get informed and get shopping!