Your Next New or Pre-Owned Boat Purchase Could be a Complete Tax Write Off!
If you make a living with your boat but have been on the fence about your next boat purchase, it’s time to quit procrastinating and find the next gem for your business or charter operation.
With the recently passed tax legislation, there are additional provisions which can provide very substantial federal tax benefits to purchasers of boats, both new and pre-owned, beginning in 2018 (and ending in 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! Furthermore, the bonus depreciation write-off also applies to any improvements made to the boat, or the equipment purchased, subsequent to the initial purchase, so long as it’s within the same calendar year of the new vessel purchase. Bluewater President Jan Boone explains, “So don’t hold back on upgrading the electronics or installing a Seakeeper Gyro with the experts at one of our 3 service yards – these items can also be written off with the purchase of your next boat within the same year.”
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 shopping!