Boating Business

Updated Tax Policies Could Benefit Yacht and Boat Owners in 2025

Considering a yacht or boat purchase? New tax policies may offer major advantages.

With updated tax provisions now in effect, yacht buyers and charter owners may enjoy favorable tax treatment, particularly when purchasing a yacht for business use. Let’s break down the benefits and the rules.

Please note: This article is not considered official tax advice. We encourage you to consult a qualified tax professional to explore how these provisions may apply to your individual circumstances.

Yacht with water toys

A well-equipped yacht ready for charter activity, with tenders and water toys supporting legitimate business use and deductible operating expenses.

What’s Changing – and Why It Matters

Tax law offers accelerated depreciation and deduction opportunities when a yacht is legitimately placed in service for business purposes, provided that more than 50% of its use is business-related. The 2025 updates to bonus depreciation, Section 179, and the excess business loss rules create strong planning opportunities for buyers structuring their ownership properly.

Key Tax Benefits to Know in 2025

100% Bonus Depreciation

For 2025, qualifying buyers may claim a first-year bonus depreciation deduction of up to 100% of the yacht’s purchase price if it is used predominantly for business activities, located primarily in the United States and placed in service after January 19, 2025.

  • Applies to new and pre-owned yachts.
  • Yachts used more than 50% outside the U.S. do not qualify and must use straight-line depreciation.

Section 179 Deduction

For 2025, Section 179 allows businesses to immediately expense up to $2,500,000 of the yacht’s cost, with the deduction phasing out dollar-for-dollar once total qualifying purchases exceed $4,000,000.

  • The deduction is limited to the amount of taxable business income.
  • Any unused portion can be carried forward to future years.
  • Note: Yachts with sleeping accommodations are often treated as “lodging property” and may face restrictions on Section 179 eligibility. Professional guidance is essential.

Excess Business Loss (EBL) Rule

Under current law, the excess business loss limitation restricts the amount of business loss that can offset other income. For 2025:

  • Thresholds are $313,000 for single filers and $626,000 for joint filers.
  • Losses above these limits cannot be deducted in the current year but instead carry forward as a net operating loss (NOL) to offset future income.
  • This rule is especially relevant for yacht charter businesses with large depreciation deductions and high operating costs.

Business Use Deductions

When the yacht qualifies as a business asset:

  • Owners may deduct expenses for fuel, dockage/storage, maintenance, insurance, captain, and crew.
  • Deductions apply only to the percentage of business use and must be supported with logs.
  • If personal use exceeds 14 days or 10% of total charter days, deductions must be prorated, and the yacht may be treated as a second home.
Man diving off yacht

Enjoying the lifestyle side of yacht ownership, where personal use must be carefully tracked to preserve valuable tax benefits.

Material Participation Requirements

To take advantage of these deductions and offset losses against other income, owners must demonstrate material participation in the yacht’s business activity. The IRS recognizes several tests, including:

  • Participating more than 500 hours in the activity during the year.
  • Being the only or primary participant in the activity.
  • Participating 100+ hours and more than any other individual.
  • Meeting one of several historical participation or facts-and-circumstances tests.

Why Documentation Matters

The IRS closely scrutinizes yacht-related deductions. To support your tax position, you must:

  • Maintain a detailed business plan showing intent to generate profit.
  • Keep logs of all usage, including dates, participants, and business purposes.
  • Retain receipts and records of expenses for fuel, maintenance, and operations.
Signing paperwork

Proper documentation and signed agreements are essential when structuring a yacht purchase.

Why Act Now?

With 100% bonus depreciation fully available in 2025 and increased Section 179 limits, this is an excellent time to consider yacht ownership through a properly structured business model. These provisions allow buyers to capture substantial first-year deductions while deducting operating costs tied to business use. With the right planning, yacht ownership can deliver both lifestyle and financial advantages.

Ready to Explore Your Options?

Speak with an HMY Yacht Sales Professional today to learn more about yachts suited for business or charter use. Call 561 262 4132 or visit one of our office locations from Newport, Rhode Island to Ocean Reef, Florida.

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