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Tax Rules That Allow Tax Deduction for Your Yacht Thumbnail

Tax Rules That Allow Tax Deduction for Your Yacht

Taxes Small & Medium-sized Business

As an advisor and a sailor in the Bay Area, this has to be one of my FAQs: "How can I write-off a boat?"

Qualifying for tax deductions on a yacht or other luxury boat requires tax knowledge.

 First, more than 50 percent of your use of the yacht must be for business transportation.

 Once you meet the “more than 50 percent” test, your potential tax deductions include fuel costs, insurance, repairs, dock or slip fees, caretakers’ salaries, hurricane storage, and depreciation (including IRC Section 179 deductions)—all of which are limited by tax rules on luxury water transportation.

Second, the yacht is an entertainment facility. Tax law treats entertainment facilities harshly, so you need to seriously consider providing no business entertainment on this yacht. This should be easy to do because business entertainment is no longer deductible, thanks to the Tax Cuts and Jobs Act.

The luxury water travel limits can change monthly. During 2020, the lowest luxury water travel limit was $760 a day and the highest was $988. Say that your yacht expenses exceed the daily limits and that you used your yacht 45 days for business transportation. At the lowest limit, your yacht deductions would be $34,200 (45 x $760)—not a bad payoff for a little tax knowledge.

If you would like to discuss your possible yacht deductions, please call me on my direct line at 925-255-0004 x104.

Fair Winds,