The "One Big Beautiful Bill Act" and Private Yachts
** This article contains general outlines and is not meant as advice. Talk to your tax expert to verify this information**
US President Donald Trump has signed the "One Big Beautiful Bill Act" into law, creating an unprecedented window for aspiring and current yacht owners. This landmark legislation permanently restores the 100% first-year bonus depreciation for "qualified property" acquired on or after January 20, 2025—and this includes yachts.
For yacht buyers, this is a game-changer. Previously, bonus depreciation was on a phasedown schedule, set to fall to just 40% in 2025 and disappear entirely by 2027. The OBBBA reverses this trend, offering a powerful tax savings tool that allows businesses to deduct the entire cost of an eligible yacht in the first year it is placed into service. This immediate write-off can dramatically reduce a company's tax liability and free up significant capital for other investments.
Navigating the Requirements
To take full advantage of this incentive, yacht buyers must be a US taxpayer, typically through a US-based limited liability company (LLC) or corporation. While foreign entities may be used, experts advise a US structure to limit IRS scrutiny.
The yacht itself must be considered "qualified property," which generally means tangible personal property with a recovery period of 20 years or less. Both new and used yachts can be eligible, as long as they are new to the taxpayer's business.
The Business Use Clause
The most crucial requirement for a yacht to qualify is that it must be used at least 51% of the time for a "legitimate trade or business." The most common way to meet this threshold is by placing the vessel in a charter program. If the yacht is used entirely for business, the full purchase price is eligible for the 100% bonus depreciation. If there is some personal use, the deduction is proportional to the percentage of business use. For example, a $10 million yacht used 70% for charter could yield a $7 million deduction in the first year.
However, buyers should be prepared to operate the yacht as a genuine business, which means maintaining meticulous records of charter contracts, guest logs, and financial activity.
The Catch: Recapture Risk
This significant tax benefit comes with an important caveat: the risk of "recapture." If the yacht's business use falls below the 51% threshold in a subsequent year, the taxpayer may have to pay back some of the deduction as income. This would also mean a switch to a less favorable straight-line depreciation schedule going forward.
The OBBBA presents a rare and time-sensitive opportunity for savvy yacht buyers. It's a strategic advantage that can transform a luxury asset into a viable business investment, but it requires careful planning and professional guidance to ensure compliance and maximize the financial benefits.