yacht Charter Ownership

Place Your New Yacht In Charter and Let It Pay For Itself

Owning a new yacht is a great experience and the fun of owning it shouldn’t be diminished by the difficulty of paying for it. Many people have found that by placing their new yacht in charter they can enjoy the thrill of yacht ownership while using the charter income and tax benefits to significantly reduce the cost of ownership. Yacht charter companies that will welcome a new Hunter or Jeanneau into their charter fleet are available throughout California so you can gain the benefits of charter placement while having your boat nearby. The charter companies to which we refer our customers are listed below.

Ability to Own a Boat

At Cruising Yachts, we and our predecessor companies have been placing new yachts in charter for over 30 years. It is a time-tested tax minimization strategy for people that: (1) want to own a yacht; and (2) have sufficient taxable income from the active conduct of a trade or business to utilize the tax benefits available by placing it in charter. Through the combination of tax benefits and charter income, charter boat owners have the opportunity to significantly reduce their costs of ownership and make a profit on their boat.

As you read further, bear in mind that placing a boat in charter doesn’t stop you from using it. It’s available for you to use and will generate charter income when you’re not using it.

Tax and Cash Flow Advantages of Charter Ownership

The key to understanding why yachts placed in charter can generate significant tax benefits is that these tax benefits are available to businesses for the purchase of business assets. By placing your new yacht in a charter management program with a charter company, you are converting it from a personal asset to a business asset and, as such, qualifying for these tax benefits on your personal income tax return as the owner of a charter business. These “business” tax deductions are not available to people who own a boat strictly for pleasure.

Here is a summary of the tax and operating benefits available to the owners of new yachts placed in charter in 2010:

1. Under Section 179 of the tax code, you can take a one-time expense deduction of the full cost of your yacht up to a maximum deduction of $250,000. This benefit is reduced for yachts priced over $500,000 (a subject beyond the scope of this article). This substantial tax deduction is an attractive tax planning opportunity if you are a highly compensated individual or receiving a large bonus or other large payment of ordinary income from the conduct of a trade or business in 2010.
2. You can depreciate the adjusted cost basis of the boat (the cost after deducting the Section 179 expense deduction ) over 10 years (using accelerated depreciation).
3. You will receive income from the charter of your yacht , the amount of which varies depending on the size of your boat and the charter company you use.
4. By placing your new yacht in charter, you can elect to PAY NO SALES TAX on the purchase of the yacht. As an alternative, sales tax can be paid on charter revenue as it is earned. That’s an immediate savings up to 9.75% on the cost of the boat, depending on your tax district.

Professional Maintenance and Support

Placing your yacht in charter is an excellent way to ensure that it will receive professional maintenance, service and care. Boats in the charter fleet are typically washed weekly and thoroughly cleaned inside and out after each charter. Routine maintenance is performed on a regularly scheduled basis and damage promptly repaired.  For you, as the yacht owner, it means that you can spend your time sailing your boat and not doing cleaning, maintenance and repairs. Some charter boats owners keep their boats in charter strictly for the maintenance and service they receive, with little or no concern for how much the boat actually charters.

Your charter management company will require that all charter customers demonstrate that they are qualified to operate the boat being chartered in order to minimize the potential for damage to your boat. Any damage caused by a charter customer, up to the amount of the insurance deductible, is paid for by the damage deposit (cash or credit card) they make up front when chartering the boat.

Is Charter Ownership Right for Me

In deciding whether charter ownership is right for you, ask yourself three questions:

1. Am I paying income tax on taxable wages or salary from my work or business?
2. Do I have a limited amount of time to use my boat?
3. Am I willing to allow qualified people to charter my boat when I’m not using it?

If the answer to these questions is “yes” or “maybe”, then charter ownership is something you should consider. The reality is that most people use their boat once a month, on average, leaving the balance of the month available for charter. Besides, if the boat is paying for itself, it relieves the pressure some people feel to be constantly using it because of the cost. This actually lends to the enjoyment of the boat when they do use it.

The Next Step

If you have an interest in learning more about placing a new yacht in charter, contact a member of our sales staff. We understand that charter ownership is right for some people and not right for others, and we’re always glad to spend some time discussing it with you and answering your questions.  If you decide to go ahead, we’ll help you select the yacht that is right for you and connect you with a charter company in your area.  We’ll walk you through the entire process and you’ll find that buying a yacht and placing it in charter is an easy and enjoyable experience.

Two Final Caveats:

(a)  We’re not tax advisors and are not able to give you advise on your personal tax situation. Everyone’s personal financial situation is different and you will need to evaluate the tax benefits of charter ownership for yourself and in consultation with your tax advisor.

(b)  Placing a yacht in charter won’t enable you to afford a boat that is well beyond what you might otherwise be able to afford. As a rule of thumb, if you have the income to afford a yacht at a certain price level, you’ll be in a position to take advantage of the tax benefits summarized above, thereby significantly reducing your cost of ownership.

Here are links to charter management companies in California we feel our worthy of your consideration:

In the San Francisco Bay Area: Club Nautique

In Newport Beach: Newport Beach Sailing Charters. For a special charter opportunity being offered by Newport Beach Sailing Charters, click here.

In Marina del Rey:  Blue Pacific Boating

In San Diego: Seaforth Boat Rental and Yacht Charter