When most people think about buying a yacht and placing it in a charter program, they think their boat will be in the BVIs, Caribbean, or even in the Bahamas, and they won’t be able to use their boat very often. However, if you place your boat in a local charter program, for example, here in San Diego, Newport Beach, or Marina del Rey, you can have the tax benefits that go along with owning a boat placed into a charter program, the ability to use your boat whenever you wish, and a nice charter income to offset the costs of owning your boat.
There are many charter programs here in Southern California. By placing your yacht into one of these local charter programs you can enjoy the charter income, the tax benefits, and have your boat available to you anytime you wish. As an example, if you lived in San Diego, or even in Scottsdale, Arizona, and you wished to use your boat, you could simply view the charter program operator’s scheduling app and block out your time with your boat.
The key to understanding how a yacht placed in charter can generate tax benefits and income to offset the cost of owning, berthing and maintaining the boat, is the realization that your boat becomes a business, and the charter company is your business partner. Here are the 4 main reasons people choose to place there are yacht in a charter program:
- TAX BENEFITS. By setting your yacht up as a business, you can take advantage of the many tax saving strategies that all other businesses take. You are putting business equipment into operation. Therefore, you can use the IRS Code Section 179 Deduction, which allows a business to deduct the full purchase price of business equipment up to $1,200,000. This substantial tax deduction is an attractive tax planning opportunity if you are a highly compensated individual or are receiving a large bonus or other large payment of ordinary income from active employment or the active conduct of a trade or business. Additionally, all expenses of ownership, berthing, maintenance, insurance, property tax, and more, are now business expenses and are deductible. You can also depreciate the boat over a 10 year period using the MACRS accelerated depreciation schedule, if you so choose.
- TURN-KEY USE. When you place your boat into a charter program, the program will inspect, maintain, repair, provision and fuel your boat so it is constantly ready for use. The benefit to you is that when you are ready to take your boat out for a sail, your boat is ready for you. Just step aboard and go.
- YOUR YACHT makes money when you’re not using it. By placing your yacht in charter you can achieve the dream of private ownership and also have the benefit of having your boat make you money when you are not able to use it. The charter income and the tax savings give you a substantial offset to ownership costs, covering your expenses and making ownership much more affordable. Additionally, as discussed above, your boat is available to you whenever you wish.
- Your boat will receive professional maintenance. your charter program operator will ensure that your boat receives regular maintenance pursuant to the manufacturer’s recommendations. The charter program operator , as your business partner, wants to keep the boat and all of its onboard equipment ready to go and looking good. By doing so, your charter program operator will help preserve the boat’s resale value.