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Navigating US Tax Benefits for Charter Yacht Owners with Mainstay Consulting Group Ltd


Owning a charter yacht is a dream that many individuals aspire to fulfil, especially in the beautiful British Virgin Islands. However, the allure of yachting isn't just about the sun, sea, and relaxation—it's also about the financial benefits that come with it. In this article, we'll explore the changing landscape of US tax benefits for charter yacht owners, focusing on the hobby loss rule, Section 179 depreciation, MACRS depreciation, and bonus depreciation. We'll also discuss how this evolving tax environment may impact yacht sales and charter yacht inventory and how Mainstay Consulting Group Ltd can guide you through these changes.

The Original Tax Benefits

For years, US tax laws have provided significant incentives for charter yacht ownership. Three key benefits that have been cherished by yacht owners are the Section 179 depreciation, the MACRS depreciation, and bonus depreciation. Let's delve into these benefits before discussing their phase-out plans.

Section 179 Depreciation

Section 179 depreciation has been a popular tax provision that allows yacht owners to deduct the cost of their yachts upfront. Under this benefit, owners can immediately deduct up to $1,160,000 in yacht acquisition costs in 2023. This provision was designed to stimulate investment in small businesses, including those in the maritime sector.

MACRS Depreciation

The Modified Accelerated Cost Recovery System (MACRS) allowed yacht owners to spread out their depreciation deductions over several years, providing them with substantial tax advantages. MACRS typically followed a 7-year schedule for yacht depreciation, with a declining balance method.

Bonus Depreciation

Bonus depreciation is another valuable benefit that allows yacht owners to immediately deduct a significant portion of the yacht's purchase price. This provision typically allowed for a 100% deduction of the cost in the year of acquisition. This was an initiative to spur business purchases by all taxpayers.

Other Options

This list is not exhaustive, there are recovery methods such as the hobby loss rule, and even simple business expense deductions to be considered.

The Phaseout Plans

Unfortunately, these tax benefits, including Section 179, MACRS, and bonus depreciation, have been subject to changes and phase-out plans in recent years, impacting yacht owners' tax advantages.

Section 179 Depreciation Phaseout

Under the phase-out plan for Section 179 depreciation, the maximum deductible amount starts to decrease when the total investment in qualifying property exceeds $2,890,000. Once the investment surpasses $3,670,000, the deduction is no longer available, effectively phasing out the benefit.

MACRS Depreciation Phaseout

The MACRS depreciation benefit has also faced changes. It has typically followed a 7-year schedule for yacht depreciation. However, with evolving tax laws, the depreciation timeframes for certain assets, including yachts, have been extended, meaning owners can't claim depreciation benefits as quickly as before.

Bonus Depreciation Phaseout

Bonus depreciation, which previously allowed for a 100% deduction of a new yacht's purchase price in the year of acquisition, has also seen changes. The Tax Cuts and Jobs Act (2017), which came into effect, increased applications of bonus depreciation to used yachts, but bonus depreciation was also set to be gradually phased out altogether.

In 2023, bonus depreciation ramps down to 80%, 60% for 2024, 40% for 2025, 20% for 2026, and by 2027 it's gone.

Implications for Yacht Sales and Charter Yacht Inventory

The changes to these depreciation methods are likely to have a ripple effect on the yachting industry, including yacht sales, yacht charter pricing, and charter yacht investment. Yacht owners who historically have relied on these tax benefits to balance their books may find it harder to justify their investments in charter yachts in the future.

A More Competitive Charter Market

With the evolving tax landscape, the charter market is set to become more competitive. Owners and operators will need to adjust their pricing and business models to remain viable. While this may create challenges, it also presents opportunities for those who can adapt.

The Rise of Cost-Cutting Yacht Manufacturers

To stay afloat in this changing environment, yacht manufacturers will likely need to embrace cost-cutting measures to bring more economical products to market. This may lead to innovations in design, materials, and construction techniques, ultimately benefiting both the industry and yacht enthusiasts. It could also lead to some hiccups in terms of cutting a little too far on material quality or learning how best to work with new methods and technologies. Lessons were learned in this regard following the 2008 market crash.

Mainstay Consulting Group Ltd: Your Yachting Advisors

In this evolving landscape of US tax benefits for charter yacht owners, it's essential to have the right guidance and expertise by your side. That's where Mainstay Consulting Group Ltd comes into play. As a marine management and consulting firm based in the British Virgin Islands, specialising in yachts and small craft, we offer invaluable advice as investment advisors, procurement advisors, and business advisors.

Disclaimer: Readers are strongly advised to consult a professional tax advisor prior to making any tax-related decisions. Mainstay Consulting Group Ltd does not provide tax advisory services but can offer referrals on request.

Mainstay Consulting Group Ltd can provide tailored solutions for yacht owners, helping them navigate their businesses through changing tax regulations and make informed decisions to protect their investments.


The phaseout of some US tax benefits for charter yacht owners may pose challenges, but it also presents opportunities for innovation and cost-effective solutions. By partnering with Mainstay Consulting Group Ltd as your trusted advisor, you can confidently navigate these changes and continue to enjoy the pleasures of yacht ownership while optimising your financial benefits. As the industry evolves, staying informed and adapting will be key, and Mainstay Consulting Group Ltd will be your reliable partner in this journey. Don't forget to consult a professional tax advisor for personalized guidance in managing your tax matters, especially as the phase-out plans for Section 179, MACRS depreciation, and bonus depreciation impact the yachting industry.


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