Get in the Boat Business to Save Money, Get Income and Have Fun
The boating business is one of the most glamorous industries in the world, yet only a tiny fraction of the millions of boat owners take advantage of the opportunity to get into it for fun and earn income and save money.
Sovereign Boat Club was formed 5 years ago to create opportunities for "shared access." But for boat owners it also can—
- Provide Income
- Give you business-Expense Tax Deductions
- Offer you Investment Credit Tax Deductions
- Lower Prices on Fleet Boats
Now, with the advent of tariffs -- even lower ones than at first proposed -- the inflation that will inevitably follow, the supply-chain deductions, and general dislocation of business, will all conspire to raise new boat prices. If inflation averages just 4.5% annually over the next five years, the new boat you buy today will cost at least 25% more in five years. Will your income increase by 25% in that time?
Private Jets Point the Way
Private jets point to the future of ownership of premium boats. We need only look at the 15,000 private jets used in general aviation in the U.S. to see what the future holds for premium boats. Nearly 60% — or 9,000 — of these non-commercial jets are owned by small corporations and are used primarily for business purposes. 450 of these jets are owned by Fortune 500 companies -- on average, one per company. They are used to shuttle c-level personnel, clients, and others around, and often their families are aboard if there are empty seats. Records are kept of each trip.
The remaining 40% — or 6,000 — are owned by fractional ownership companies, clubs, charter operators, or Jet Card companies. "Shared-access" jets are the fastest-growing segment of the business jet market. Virtually all of these jets are used for business and therefore qualify for tax deductions and depreciation on tax returns of the people opwning them through LLCs, thus saving the people who own them millions of dollars in taxes.
Business-Friendly Tax Laws
The IRS has many rules designed to promote new business and the buying of equipment for those ventures. Section 179 of the IRS code is one of those rules. It allows companies to write off 100% of the cost of new equipment purchased in one year. Further, it allows owners of those companies to aggregate the income from all businesses they own and deduct the equipment purchased (i.e. the boat) from all business income.
This remarkable tax deduction was first introduced into the U.S. tax code in 1958 as part of the Small Business Tax Revision Act of 1958. The original intent of Section 179 was to help small businesses by allowing them to immediately expense the cost of capital equipment, rather than depreciating it over time.
Over the decades, the limits and rules have been expanded significantly to encourage more investment by businesses in equipment and technology.
The Sovereign Boat Fleet: Designed for the Times
Five years ago, BoatTEST started Sovereign Boat Club (aka Sovereign Boat Club) because it was obvious that the prices of boats would become out of reach for most people, and that “Shared Access” would be a wave of the future.
The concept is simple:
- A person who can afford a boat buys one and puts it into the Sovereign Fleet, earns income, gets tax deductions, and can get lower prices for SBC for new boats.
- People who can’t afford a boat (or don;t want to get a large chunk of their capital into a depreciating asset), but who want to enjoy the boating lifestyle, can buy a low-cost Membership, get the boat almost whenever they want, and enjoy the fun of boating without the cost, the hassle, and the debt burden.
- Sovereign manages the boat and sells Memberships in it, and handles all details of reservations, operator instruction, maintenance and record keeping, making the tax deductions, income and lower boat prices possible.
It is truly a win-win program for all concerned:
- The boat owner receives income to pay for the boat’s operating costs, as well as being able to deduct 100% of the cost of his boat from all business income, plus may be able to depreciate any cost not deducted the first year over five years.
- The boats' Members have virtually unlimited access to a boat they would otherwise be unable to afford, and their dues are far less that the annual operating expenses of the boat, plus the Member is shielded from the hassles of boat ownership.
- The boat builder sells more boats to help keep his factory humming.
- The shop floor personnel and builder’s support team have jobs in a field they love.
The Economics of Putting a Boat in the Fleet
Section 179 Explained. Businesses can deduct up to $1,220,000 of qualifying equipment under Section 179 in the first year of ownership. This deduction phases out when total equipment purchases exceed $3,050,000.
In 2017 an additional “Bonus Deduction” was added to the IRS program, which has been stepping down each year, and is worth 40% for 2025 purchases.
Example of a boat bought in 2025 and put into the Sovereign Fleet:
- A boat is purchased for $5,000,000
- Business use is over 50%
- Section 179 allows a tax deduction of $1,220,000
- Bonus Depreciation (40% of remaining $3.78M, or $1,512,000)
Total first-year deduction: $2,732,000. (For a person in the 37.5% tax bracket, that is over a million dollars of tax savings the first year.)
The Bonus Depreciation Phase-Down Schedule: 2025 - 40%; 2026 - 20% and in 2027 and beyond: 0% -- unless the 2017 tax law is extended. This phase-down was part of the 2017 Tax Cuts and Jobs Act (TCJA) signed by President Trump. Unless new legislation is passed, bonus depreciation will fully expire in 2027.
MACRS Depreciation
If you don’t use Section 179 or bonus depreciation, you may use the “Modified Accelerated Cost Recovery System” (MACRS). The requirements--
- 5-year recovery period for most boats used in business
- Requires consistent business use documentation
Additional Deductible Expenses Beyond depreciation, are expenses associated with operating the boat for business purposes, including:
- Some fuel costs (For demonstrating the boat, travel for maintenance, etc.)
- Insurance premiums
- Maintenance and repairs
- Docking and slip fees
- Crew hourly for maintenance work
- Marketing and advertising expenses
You Enjoy the Boat, SBF Does the Work
Sovereign collects Membership fees and distributes them to the boat owner’s LLC, oversees boat expenses and bills the owner, and provides the owner a monthly accounting of income and expenses. SBC dedicated captain looks after your boat, sees to that it is cleaned and maintained, and trains all Members. The captain ferries the boat to the local dealer if work needs to be done.
Caveat: Boats in the Fleet are for Shared Access, Charter and Rental Boats placed in the Sovereign Fleet must be owned by a dedicated LLC formed for the sole purpose of sharing access, chartering or renting the boat for business purposes. Personal use by the owner(s) of the LLC may not exceed 50% of the days available for use, in accordance with IRS rules. Owners must have a real economic risk in the investment and be materially involved in the business to fully deduct losses. Sovereign outlines the responsibilities of the owner in a contract to make sure the owner is aware of IRS compliance regulations.
Boats Available for Purchase at Special Fleet Pricing
There is yet another way that Sovereign can help save a boat owner significant money: SBC in collaboration with BoatTEST, has made arrangements with select boat builders to offer boats to buyers at special Fleet pricing. These boats have been inspected by both BoatTEST’s and SBC’s captains and meet Sovereign’s criteria for inclusion in the Sovereign Fleet. Fleet boats are not limited to these brands, and owners of other boats, larger than these may be appropriate for the Fleet.
Boats with special Fleet Pricing include, but are not limited to:
https://boattest.com/boats/edgewater/262cx
https://boattest.com/boats/monterey/elite-27
https://boattest.com/boats/schaefer-yachts/v33-sport-fish-2025
https://boattest.com/boats/nimbus/t9-2020
https://boattest.com/boats/nimbus/t8-2023
https://boattest.com/boats/robalo/r317-2019
https://boattest.com/boats/pursuit/dc-306
https://boattest.com/boats/monterey/elite-30
https://boattest.com/boats/axopar/29-sun-top-2024
If you have a boat that you would like to put in the Sovereign Fleet, contact the folks at Sovereign to find out about our special program for putting your boat in the boat business. This could be the start of a new chapter in your boating adventure.
