Catamaran Guru has been at the forefront of developing and operating the “Yacht As A Business”, or for us, “Catamaran As A Business” concept. We have not only advocated it to our yacht-buying clients, but have personally benefitted from this program. We found that most yacht owners use this program as an avenue to acquire the cruising catamaran of their dreams for retirement at a huge discount. Others, like ourselves, use the yacht charter revenue together with the business tax deductions to reduce the costs of owning a very nice yacht that we enjoy now.
Catamaran Business Ownership
Whatever your reason, Catamaran Guru’s team of experts can set up your yacht charter business in compliance with tax authorities to suit your individual financial and personal goals.
Watch our in-depth interview with one of our yacht-as-a-business boat owners. He shares details and his experience about owning a charter yacht and working with Catamaran Guru. He is candid about how the yacht charter business program he chose is working for him and talks openly about the challenges of charter boat ownership, tax advantages, actively managing the business, and his first year revenue and profits.
You, too, can work with Catamaran Guru to discover the pitfalls and get expert advice when you work with us.
What Is A Yacht or Boat Business?
A yacht or boat business is a fairly simple concept and is structured much like any other for profit business. By placing a yacht into a corporation (usually an LLC) and operating it actively for profit, either directly or through a third party management company, the owner is able to generate substantial tax advantages that further offset the cost of ownership. For U.S. buyers who are in high income tax brackets, this is definitely an option of ownership that should be explored.
The tax benefits must be carefully planned and documented to make sure that the business activity can withstand scrutiny. There are very specific rules and requirements that need to be complied with in order to meet the standard of actively operating a business for profit and taking tax advantages.
The goal is to structure your boat business in such a way that you have the intent and ability to make a profit! What you CANNOT do, is structure this business with a flawed business plan of “limited charter” and purposely run it at a loss to avoid wear and tear while offsetting the cost of ownership with business tax deductions. You CANNOT “pretend” to be in business! However this program, when done correctly, offers the least expensive alternative to own a boat!
What Is Section 179 Business Tax Deduction?
People seem to think that the Section 179 deduction is some complicated tax code, but really it is not. Essentially, Section 179 of the IRS tax code allows businesses to deduct operating expenses and depreciate the qualifying equipment purchased or financed during the tax year. Typically, when a business buys new equipment, the purchase price can be depreciated using the MACRS scale which is an accelerated depreciation schedule.
The original target of this legislation was much needed tax relief for small businesses – and millions of them are actually taking action and getting real benefits. So, if you are in the market for a new yacht, the Section 179 rule should definitely be a part of your yacht-buying strategy.
According to this law, when used as part of a business, you can legitimately divert some of the taxes that you’re already paying into the sailing vessel. This in turn, creates equity in your new yacht. Therefore, buying a new yacht and placing it in charter service as a business, makes total sense to reduce cost of ownership and turn tax advantages into an investment. It is vitally important the business is set up correctly and the operation is structured to qualify for the tax benefits and remain in compliance going forward.
Understanding Section 179 Business Tax Deduction
*The U.S. Congress has halted the Section 179 roller coaster of the past recent years by making the Tax Deduction limit permanent. The limit was raised to $1,000,000 for 2018 and beyond. This is wonderful news for yacht businesses, as the owners and their tax advisers now know early in the year that the deduction will be there for them and they can plan accordingly.
Section 179 Tax Deduction Limits for year 2018
2018 Deduction Limit: The Tax Cuts and Jobs Act has INCREASED the Section 179 Deduction to $1,000,000. Businesses can deduct the full cost of equipment from their taxes.
2018 Limit On Equipment Purchases: This is the maximum amount that can be spent on equipment before the Section 179 deduction available to your company begins to be reduced. The “total equipment purchased for the year” threshold INCREASED to $2,500,000.
Bonus Depreciation: 100% for 2018 through 2022 and is made retroactive to 9/27/2017 – Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached.
Note: Bonus Depreciation is now available for new equipment AND used equipment
Example Of Section 179 At Work For 2017
To take advantage of the current deduction and any retroactive raise, you must purchase the equipment and be placed into service by 12/31/2018. Form 4562 covers this deduction
Bonus Depreciation: Deduction currently 50%
Section 179 Deduction:
Bonus Depreciation Deduction (100% for 2018 through 2022 retroactiveto 9.27/2017)
Normal First Year Depreciation
Total First Year Deduction
Cash Savings: assuming a 35% tax rate
Lowered Cost Of Equipment After Tax Savings
*The above information is an overall, “simplified” view of the Section 179 Deduction. For more details on limits and qualifying equipment, please contact us directly about the variety of yacht ownership programs we can help you evaluate.
TWO YACHT OWNERS IN THESE PROGRAMS, GIVE THEIR PERSPECTIVES
Co-Management Business program with Guaranteed Income
Traditional Yacht as a Business Program
May 2020 ALERT! Crewed Charter Business Opportunity!
Offset the Cost of the Yacht by Using the New CARRY BACK tax rules!
- Recover taxes paid in past years to offset the cost of the yacht purchase. Learn more about Yacht as a Business & Tax Advantages.
- Cover all the costs of ownership including the mortgage payments with income and tax advantages – the boat pays for itself!
- Enhance your lifestyle with owner use of the vessel and enjoy the pride of ownership
- Lagoon 620s and Bali 5.4s available in this program
- Virgin Islands and Bahamas locations
- “Owner Operator” option available for those who want to make a career change and be involved full time
WORK WITH OUR YACHT OWNERSHIP SPECIALISTS
How Can Catamaran Guru’s Team Help You?
Catamaran Guru’s Team Is Recognized As Yacht Business Program Experts. If you are serious about creating a yacht business, consult with the Catamaran Guru Team! If we assist you throughout the whole process, there are no additional costs to you, the buyer!
If you are a US tax payer, enjoy sailing and yachting, and want to own your own yacht at a substantially reduced cost, this program will work for you. Catamaran Guru’s team will work with you and your tax professional to qualify your “Yacht Business” to legitimately take advantage of tax deductions available to you. Although the acquisition of a new yacht may be an effective business tool to take advantage of these tax rules, the tax benefits must be carefully planned to make sure that it can withstand scrutiny.
This is where Catamaran Guru’s team can be of great value to you!
- We guide you on your selection of the yacht to purchase and advise you through the buying process
- This business yacht ownership program is designed for flexibility to enable the owner to choose various yacht models and layouts including owner suite in some cases, upgraded equipment, multiple worldwide locations and flexible owner use. We will guide you to make a good choice to suit your individual goals.
- Once you’ve decided on a yacht to purchase, we will help you set up your “Yacht As A Business” and structure it to comply with IRS tax rules. This will ensure that all allowable business tax deductions, advantages and yacht charter income, will largely cover the cost of boat ownership.
- We will help you find a placement with a suitable charter management company. We have extensive experience in the charter management arena and will make sure that you and your charter company is compatible. In our experience, yacht charter management together with active participation by the owner is a great way to reduce the cost of yacht ownership. It is the perfect opportunity for anyone looking to buy a new yacht at a substantial “discount”!
When You Work With Our Team
- You get the most complete yacht ownership program available, including a 5-year projection, tax schedule, and business plan
- We show you how to set up your yacht charter business to be in compliance with current tax laws.
- We guide you on how to qualify for tax advantages that can offset your ordinary income.
- We familiarize you with the current tax laws and how they apply to your particular situation.
- We discuss and plan your exit strategy
- We guide you if you choose to upgrade to a larger yacht within this structure
- We show you how to make your yacht be part of your retirement plan.
- We help you understand the difference between a Charter Company Guaranteed Income Program (passive) and Yacht As A Business program (active participation)
We Work With Top Catamaran Brands and First-Tier Charter Companies
- Catamaran Brands: Catamaran Guru can offer you access to some of the top brands of yachts in the world like Fountaine Pajot, Lagoon, Bali Catamarans, Xquisite Yachts, and others.
- Charter Companies: We offer the added luxury of making it possible for you to place your new yacht into service at charter bases in multiple locations around the world through affiliations with reputable charter companies like Dream Yacht, CYOA, and others.
Contact Us For a Consultation
There is a lot of information in these pages as we tried to make it as comprehensive as possible. But there is a lot to absorb so you may need someone to help you sort through it all. Plus there are always questions that deal specifically wtih your personal situation.
Contact us for a comprehensive consultation. Our services come FREE if we represent you during your yacht-buying process.
BUSINESS YACHT OWNERSHIP REFERENCE MATERIALS
FAQ & Common Misconceptions About Yacht Ownership
We find that explaining what this program entails is easier for yacht owners, their accountants, and other financial advisors, if some common misconceptions and questions are addressed. This list gives a clear and uncomplicated picture of the program. Read more about yacht ownership facts and fiction.
How To Set Up A Yacht Business To Comply With Tax Laws
There are many things to consider and we give you a basic overview of how to qualify for tax advantages. Before you make the decision to purchase a yacht, consult with us to figure out if this scenario will be suitable for your situation. We will advise you on what size yacht you qualify for and what charter company will work for you in which location. We can discuss all scenarios with you and tailor the program for you and your family.
- How to set up your Yacht Business
- How To Operate A Legitimate Yacht Charter Business
- Track Your Business Activity with the Harvest App on Your Mobile
Section 179 Deduction Explained
This article explains exactly how section 179 works and how it affects boat owners. Read more about Section 179 deductions for boat businesses.
Compliance Issues For A Legitimate Yacht Charter Business
While there are many skeptics and detractors to operating a yacht as a small business, we know that if it is done correctly, with a sincere intent to create a small business, which will either be profitable in the short term or in the long term through a paid-off asset acquisition, it is the correct business strategy for a yacht owner to reduce the cost of ownership. Read more about overcoming yacht charter business compliance issues.
Charter Boat Owners Win IRS Challenges
The number one objection from CPAs is that our business yacht management program is a passive activity and will not be deemed active participation. They contend that it can be very difficult for a boat owner to prove active participation in a boat business and qualify for small business and section 179 tax deductions. However, in 2015, a couple won their case in Tax Court on passive vs. active participation. Their success validates the model that Catamaran Guru uses when advising boat buyers regarding charter boat ownership.
- Read more about the IRS case and how this charter boat owners won
- And for another court case discussing material participation in a boat business, see Kline vs IRS.
Section 179 Tax Advantages & Related Court Cases
We have seen many yacht businesses operated in charter programs very successfully around the world as small businesses by our clients. Offsetting the cost of ownership is a sound business strategy especially in the yacht charter business. However, there are many regulatory challenges to a yacht charter program, including complex tax laws, IRS regulations, active participation rules, profit motive and other business considerations.
The Court cases below illustrate the tax implications of yacht charter operations. Read about boat business tax advantages.
BUSINESS YACHT OWNERSHIP SUCCESS STORIES
These are the websites of some of our owners already in the yacht business program. They have enjoyed tremendous success by following our advise and complying with the rules. We add yacht businesses like these every day and we can help you do the same!
- www.sailbigdog2.com: BigDog is a Lagoon 400 that operates in the Bahamas as a bareboat yacht business and is fully booked for most of the season.
- treasurecatcharters.com: This Lagoon 450F is in bareboat charter business in the Bahamas. The owners are very active in promoting their business with exhibits at boat shows, booking charters and promotional advertising.
- catamaranguru.com: Our own previously owned catamaran, Zuri, a Lagoon 450S, was in the program in the U.S. mostly doing instructional charters and exhibits at boat shows and demonstrations for prospective buyers.
- ftmcharters.com: The Voyage 500 and her crew/owners is one of the most successful crewed boats in the BVI with numerous awards for excellence!
- sailallende.com: This Fountaine Pajot Helia 44 is in Crewed Yacht charter in the BVI. This young couple is making big waves in the industry with exceptional service.
- irishroversailing.com: This Fountaine Pajot Liapri 41 operates between Annapolis in the summer and the Bahamas in the winter as a successful bareboat business.
- sailseastheday.com: This Lagoon 450 is in bareboat charter in a business program.
- Blue Water Luxury Charters: The Xquisite 50 Catamaran is well suited for luxury charter and is crewed and operated by its owners, Peggy and Dave in the Bahamas and US.
Boat Business Ownership Resources
- Section 179 Tax Deduction Calculator
- Form 4562 covers this deduction
- Overview of Tax Relief Act Of 2010
- Full Text of Tax Relief Act Of 2010, H.R. 6467
- Checklist for Vessel Purchase
- Active vs. Passive Activity
- Section 168
- Boat as a Second Home
*This information is general in nature and purchasers are encouraged to seek experienced legal counsel in yacht acquisition planning and implementation. Catamaran Guru is not a licensed tax attorney or CPA and is not qualified to give legal advice, but we can put you in touch with experts who are.
More Charter Management Tips
Two Yacht Owners in These Programs, Give their Perspectives
Many skeptics and detractors feel operating a yacht as a small business is not a legitimate active participation business. But our experience is that if