us yacht tax

Save clients money on taxes

Over 1,500+ tax strategies

Deduct meals provided for business purposes

Reduce taxable income & self-employment tax by hiring your kids

Claim a tax credit for your spend on business R&D expenses

Manage client requests

1040, 1120/S, 1065 & more

Plan for multiple entities

Easily gather planning inputs

52+ states and localities

Custom-branded tax plans

Request and manage documents

Yachts and Taxes: Everything You Need to Know

7 minute read

Those who are seeking freedom, pleasure, or adventure often dream of owning a boat. Unfortunately, the cost of boat ownership is financially draining due to expenses such as storage, registration, insurance, fuel, and maintenance. However, there is some good news for those who want to set sail.

Can You Write Off a Boat on Your Taxes?

The good news is that there are some tax write-offs available for boats used for business and even pleasure that can offset some of the expenses. And yes, this includes yachts and tax deductions.

What Taxes can You Expect When You Buy a Yacht?

The bad news is that yachts are subject to taxes. These taxes go towards waterway upkeep, on-water services, and boat facilities. Most of the taxes will be state-based, so you should find a planner who is versed in state and local planning as well. There are 4 common taxes that yacht owners have to pay.

Sales tax is paid at the time of purchase. This tax is based either on a percentage applied to a portion of the purchase price or a flat rate with a cap. Yacht owners may also be subject to a local sales tax. The sales and local tax are dependent upon the state, county, and municipality that you made the purchase.

If you don’t pay sales tax on your yacht at the time of purchase, you probably will have to pay a use tax in the state where you will be storing your boat. Use tax is applied to only a certain portion of the yacht’s purchase price. If the sales tax rate is higher in the state you purchased the yacht than the use tax in the state where the boat is being stored and used, then you will probably want to opt to pay the use tax and not the sales tax.

Personal Property Taxes

Many states levy a tax on personal property such as cars, and that could be extended to your boat! Depending on the state the yacht is based out of, you may have to pay personal property taxes on a yearly basis.

Property Taxes

There’s even a property tax on the boat slip. If you own a boat slip, the slip is assessed by the local municipality. If you are leasing a boat slip, property taxes are usually included in the monthly lease.

Easily Save Clients Thousands in Taxes

Scan client returns. Uncover savings. Export a professional tax plan. All in minutes.

What is a Yacht Tax Write-Off?

While there are taxes every yacht owner has to pay, the flipside is that there are some tax deductions that can save yacht owners money on their taxes. The deductions depend on how the yacht is being used.

Business Use

There are some substantial tax deductions if you are using your yacht for a legitimate business purpose such as chartering or for sightseeing tours. To qualify for business use, the yacht must be used for business purposes at least 50% of the time.

Purchase Price Expense Deduction

Under Section 179 of the Internal Revenue Code, the Purchase Price Expense Deduction allows an entity, either a corporation, partnership, or LLC, a one-time deduction of 100% of the purchase price of the yacht, up to a maximum deduction of $500,000, during the year of purchase. However, the benefit is reduced if the purchase price is more than $2 million. The yacht can be new or pre-owned. Equipment upgrades can be written off as well if they are within the same year the yacht was purchased.

Business Expense Deductions

If you are earning income off of your yacht at least 50% of the time, then you can deduct business expenses from your taxes. Some of the business expenses that can be deducted include equipment, slip costs, fuel, maintenance, crew salaries, interest, property tax, insurance, and depreciation. Thanks to the Tax Cuts and Jobs Act, entertainment is no longer deductible.

Home Office Deduction

This deduction is frequently overlooked. If your boat is used as a part-time office, you may also qualify for the home office deduction. The activities in this yacht office must be business-related and occupants must have business discussions while aboard the yacht.

Business Commuting

If you use your boat for commuting to and from work, you also may qualify for tax deductions. Again, you must use the yacht at least 50% of the time for business transportation. The deductions for business commuting include storage, crew salaries, depreciation, repairs, fuel, and insurance.

Depreciation

As mentioned earlier, depreciation can be a tax deduction if the yacht is used in business. A bonus depreciation deduction can be taken in the year the yacht was purchased. Depreciation, in this case, is 100% of the purchase price., but this is only available until the end of 2022. Beginning in 2023, the amount of bonus depreciation will be 80% of the amount over 0,000 after section 179 . The adjusted cost basis of the yacht can be depreciated over the period of 10 years. To determine the cost basis, you deduct the Section 179 expense deduction and the bonus depreciation deduction from the purchase price. Cost basis is the balance.

What are the Tax Advantages of Living on a Boat or Yacht?

Some individuals actually live on their yachts. There are even tax advantages to using your yacht as a primary residence or as a second home.

Is Boat Loan Interest Tax Deductible?

Deducting the interest you pay on your boat loan, similar to mortgage interest, is the biggest tax deduction for recreational boating. To qualify for this deduction, the yacht must have a toilet, cooking facilities, and a sleeping area. The second home mortgage interest deduction has a cap of $750,000.

If you rent your boat out, you need to stay on the boat for either at least 14 nights during the tax year or 10% of the number of days the boat was rented to take advantage of the tax deduction as a second home.

There’s another tax advantage to living on a yacht. If your yacht is listed as your primary residence and you happen to sell it at a profit, you could qualify for a capital gains exclusion which would result in a huge savings on your taxes.

Is There any Deduction for Donating a Yacht to Charity?

If you are in a position to donate your yacht to charity, then the IRS offers a deduction for this generous act. The market value of the yacht on the day it is donated can be deducted from your taxes.

Getting the Most Out of Yacht Tax Deductions

If you are a yacht owner and are looking to save on taxes, deductions can be a powerful strategy. Good tax planners, however, use a variety of strategies each year to save money. Tools such as Corvee tax planning software help taxpayers quickly find the strategies available to them. Request a demo today.

Tax Professionals Guide to Maximizing Business Start-Up Cost Deductions

Employee Benefits Tax Guide for Professionals

Tax Deductions for Home Business Owners Guide

Popular Posts
Latest Posts

Maximizing Client Tax Savings Through Business …

GoFundMe Donations Tax Deductibility Complete Guide

Top 9 Tax Deductions and Credits …

Child and Dependent Tax Credit for …

Tax professionals guide to maximizing business …, tax deductions for home business owners ….

Maximizing Tax Savings With Section 179 …

Take The Next Step

See how Corvee allows your firm to break free of the tax prep cycle and begin making the profits you deserve.

Want to Learn More?

Please fill out the form below.

Name * First Last
Firm Size / Revenue * Firm Size/Revenue* Sole Practitioner (Less than $250K) Small Firm ($250K-$1M) Medium or Large Firm ($1M+) I do not own a firm
Firm Specialty * Firm Specialty* Multi-Service Tax Accounting Financial Advising I do not own a firm
Tax Planning Software
Growth and Development Programs
Advisor Partnership
I agree to the privacy policy. By clicking “Submit” I agree to the Terms & Conditions and Privacy Policy and agree to receive emails and texts about promotions at the phone number and email provided, and understand this consent is not required to purchase.
Email This field is for validation purposes and should be left unchanged.

Interested in Partnering?

Fill out the form below, and we'll be in touch.

State * State* Alabama Alaska American Samoa Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Guam Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Northern Mariana Islands Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah U.S. Virgin Islands Vermont Virginia Washington West Virginia Wisconsin Wyoming Armed Forces Americas Armed Forces Europe Armed Forces Pacific State
Current Broker-Dealer or RIA *
Assets Under Management *
Comments This field is for validation purposes and should be left unchanged.
Partner with an Advisor
Become an Advisor
Phone This field is for validation purposes and should be left unchanged.

Schedule Your Free Demo

Hidden Firm Specialty * Firm Specialty* Multi-Service Tax Accounting Financial Advising I do not own a firm
Hidden GCLID
By clicking “Submit” I agree to the Terms & Conditions and Privacy Policy and agree to receive emails and texts about promotions at the phone number and email provided, and understand this consent is not required to purchase.
Name This field is for validation purposes and should be left unchanged.

Schedule a Free Demo with Q&A

Let us show you how you could save your clients thousands of dollars and make tax planning easier than ever with Corvee.

Request a Demo 2.0 (Tax advisor or accountant)

" * " indicates required fields

By clicking the button above I confirm that I have read and agree to the Terms & Conditions and Privacy Policy and agree to receive emails and texts about promotions at the phone number and email provided, and understand this consent is not required to purchase.

Answers in Boat Tax Law

Maryland and us boat tax attorneys.

How to avoid paying taxes on your boat…legally!

Eds. Note: This article originally appeared in the Waterway Guide as a feature for cruisers. http://www.waterwayguide.com/resources.php . Updated to reflect Maryland’s cap – more here .

Dirk Schwenk, Esq., is a real estate and maritime attorney located in Annapolis, Maryland. If you are interested in his non-tax practice, please see Baylaw, LLC . For issues specific to waterfront property, please see Waterfrontlaw .

In my last article, I wrote about Maryland, specifically Maryland’s boat tax, and while Maryland and the Chesapeake are fantastic cruising grounds, I do recognize that there are other states in the Union. Since many of you readers and many of my clients venture out in the world-visiting far flung locales from Maine to Florida, the Caribbean and far beyond-I am often asked about the tax implications of other jurisdictions. I take these inquiries to mean:

How can I legally avoid paying taxes on my boat?

There is of course no simple answer to the question. If there were, the tax authorities would close it. That’s what happened in the good old days when it was pretty safe to register a boat to Delaware, place it in Coast Guard documentation, and call it good.

After reading this, many folks will just want to buy their boat, pay the tax, and go cruising, and that’s great. Many boat taxes support boating related activities and needed facilities. Others purchasers, however, plan to leave the country, or keep the boat moving for a long time, and perhaps have a higher threshold for risk. Paying sales tax may not be desirable or necessary, and they may be willing to do what is necessary to organize their boating life in a way that is not subject to tax.

This article is the first step, and the easiest step in that direction.

Before we get into specifics, however, let’s go back to the beginning. What kind of tax are we talking about and who collects it? There is no federal vessel tax (and may the federal luxury tax stay good and dead!), so taxes are imposed at the state and local levels. Generally, there are three taxes of concern to boat owners: sales tax, use or registration tax, and personal property tax. Sales tax is imposed, if at all, at the time of purchase. Use tax is imposed by sales tax states on goods that were not taxed at the time of purchase. Personal property tax is an annual tax, payable every year, on property that is kept within a jurisdiction. This article will focus on sales tax.

It is hard to keep track of all of the state taxes, and nearly impossible to keep track of all of the county and municipal taxes. Not only are they all different, but they also all subject to change. BOAT/US provides a good general comparison of state taxes on its website www.boatus.com/gov/state_boat.asp but I understand that it is being updated now after several years without revision.

Below is a table that gives the bare-bones of the state taxes in the East Coast cruising grounds as they exist at the moment (revised 2016). It does not include many defenses, exceptions, exclusions, penalties, interest on late payments, and any number of other important details, nor is it legal advice, but it does provide a rough snapshot of the tax on the purchase of a boat.


	2%	No
	6%	No (but higher registration fees)
	No	No
	No	No
	6%	No
	4% + local	Yes
	5% (2013 Edit — at least temporarily, MD is capped. )	No
	5%	Yes
	5%	Yes
	$10 to $1761.40 depending on size and propulsion with some exemptions	No
	3.5% Capped in 2016 at $20,000	Yes
	8.25% most counties Capped at $18,975	No
	3% with $1,500 cap	Yes
	6%-7%	No
	No	No
	5% with $300 cap	Yes
	No	No
	2% capped at $2,000	Yes

Mr. Schwenk provides representation in purchase, sale and tax and also buyer’s broker (selling broker) services to select clients. It is strongly recommended that you do not enter into a contract with dual agency (one broker as both listing and selling broker). If you would like buyer’s representation – please email with the heading “Baylaw Buyer’s Broker” or use this link: [email protected]

To return to the question-How can I legally avoid paying taxes on my boat-the middle column is the key. Sales tax is the tax on a purchase or transfer of a boat. If you want to avoid sales tax, the easiest option is to finalize your purchase in a jurisdiction that doesn’t tax the sale or caps the tax at a low number. This may mean driving to Delaware and choosing a boat at a Delaware dealer.

There are more sophisticated strategies as well, such as writing a contract that requires a Massachusetts boat to be purchased through a transaction that takes place New Hampshire. Or taking final possession and completing the purchase of a boat in international waters-this is where most of the big boats go. These latter items have their risks, however, particularly the fact that they make local tax authorities suspicious, even if the transaction is properly done. It does not help matters that some unscrupulous purchasers will fake an out-of-state or international transaction, and thereby paint legitimate purchases in a bad light.

Another very good option to avoid initial sales tax is to identify an escape clause in your local tax jurisdiction. In Maryland, for example, one need not pay sales tax on a boat that files a certification stating that it is going to leave the state within 30 days of purchase. Similarly, in Florida, a non-resident need not pay tax if the boat is taken to a different state shortly after purchase. If you anticipate taking your boat out of the country, using it in a state that does not have a sales tax, or actively cruising between lots of jurisdictions, avoidance of paying the initial sales tax can be a big cost savings. If nothing else, a boat can depreciate a good deal over the course of a few years.

I stated above that this article would address the first step in legally avoiding tax on a boat. Well, that was it. The first step is to legally avoid sales tax. Anyone that has been around boats, however, will recognize that this is just the beginning. Most sales tax states have two other closely related taxes, title tax and use tax. Use taxes were devised to take the profit out of going across state lines to purchase products, which is exactly the conduct we’re talking about here.

Use tax is usually imposed at the same rate as sales tax and is imposed when you bring the boat back into a state. Use tax must be of primary concern to anyone that has not paid sales tax. (If you have paid sales tax to a state however, you can rest easy, as sales tax is an offset to use tax). For Marylanders, use tax is the tax that a buyer will face on the boat purchased in Delaware and brought home on a trailer.

Future installments of this Waterway Law column will address use tax and personal property tax. These taxes are more complicated in their application than sales tax and take much more sophistication to legally avoid. Use tax is triggered by the use of the vessel and is subject to lots of argument about how much time triggers the tax as well as exceptions and defenses. Personal property tax is often collected by local counties or cities, and so it can be widely different even within a single state. There are no simple answers here.

In the meantime, if you are buying or have purchased a boat for a significant amount of money, you should seek specific legal advice about how to conduct your affairs. Avoiding sales tax is only the first step, but if done improperly, can bring far worse consequences such as penalties, interest, liens, etc. A good lawyer can provide advice about how to maintain your boat in a situation in which it does not owe tax, and if you follow that advice, you can save a significant amount of money.

Happy cruising!

Luxury Boat Ownership – The Tax Implications and Other Things to Know

Reaping the Tax Benefits and Avoiding the Pitfalls of Owning a Yacht

The average “boat owner” has to deal with the trials and tribulations of owning a weekend “runabout.” However, for a luxury yacht owner, boat ownership is literally in a class by itself. For purposes of this article, the word “yacht” and “boat” are used interchangeably. Rather than any kind of “regrets” those of you who are visiting the Miami Boat Show (February 15-19, 2023) with the intention of buying a yacht, we say “congratulations!” and wish you a lifetime of fulfilling dreams of unparalleled recreation, decadent soirees, and exclusive trips to exotic ports of call throughout the world. Dubai, the French Riviera, or the Amalfi Coast awaits!

With all that luxury, there can also come some heavy tax burdens. As with your other high-end assets, the way you structure your acquisition will play a direct role in the enjoyment of your new acquisition. If handled correctly, there may be several tax advantages and deductions that you can leverage which will enhance your satisfaction of luxury boat ownership. To name one aspect, writing off many of the expenses of owning your yacht “as a business” through judicious use of allowable tax deductions.

In this article, we will discuss how to reap some of these benefits while avoiding the pitfalls sometimes associated with local, state, and national taxes, attribution of income, and other charges and liens associated with luxury yacht ownership. We will also look at the challenges and special tax considerations for U.S. citizens owning yachts but operated in other jurisdictions. The imposition of tax whether it be a Value Added Tax, a Sale tax, a Use tax, or other tax is universally imposed by the jurisdiction where a tax nexus is created but can often be easily avoided. For example, if the Yacht were operated in the Mediterranean, the laws of the European Union would need to be considered. The imposition of these kind of taxes is beyond the scope of this article.

Your Boat as a Business

If you operate your boat as a business, you may be able to use allowable deductions such as depreciation to reduce your taxable income. This is also sometimes referred to as “active yacht ownership.” Either way, it is a business/ tax strategy applicable to the ownership of a yacht and can offset the high cost of yacht ownership. One strategy, simply stated, is to place the Yacht into a charter program to generate income. The good news is that doing so does not mean that you can no longer use the boat for your own personal recreation. U.S. law still allows personal use if the ultimate beneficial owner’s use is properly structured.

The tax advantages of active yacht ownership can be substantial, even beyond the kinds of deductions that a “land bound” business can traditionally take for business expenses.

Offsetting Expenses Through IRS Section 179

The most common method that active boat owners use to offset business expenses is through IRS section 179.

Section 179 was initially intended to help small businesses acquire new high-value equipment essential to their operation. However, it also allows a business owner to deduct the cost of certain types of property, including a luxury yacht, on their income taxes as an expense, rather than requiring the cost of said property to be capitalized and depreciated.

Depending on your circumstances, you may be able to utilize various tax deductions as business expenses such as boat insurance, slip fees, loan interest (if you financed your purchase), repairs, etc.

If you choose not to run your yacht as a business, you may also leverage tax savings by declaring the yacht to be a secondary residence, which will be covered in a subsequent section of this article.

Depreciation for Boats for Income Tax Purposes

If, for some reason, you are unable to claim the immediate tax deductions afforded by Section 179 or would rather choose to recover the cost of a “qualified asset,” such as a luxury yacht, over a longer period, you may wish to use the depreciation schedule from Sections 167 or 168 of the tax code. The special allowance under Section 168 has become known as “bonus depreciation.” It has been so-called because it “increased the bonus depreciation percentage from 50% to 100% for qualified property acquired and placed in service after September 27, 2017. The date by which a Yacht owner must apply is under review by the IRS and there is subject to review by your tax advisor.

Where to Flag Your Yacht

Unlike buying even an expensive luxury car or a high-end piece of real estate, buying a yacht is unlike any other high-end purchase, because, by its very nature, it has international implications.

Where to “flag” or register your yacht must be decided early in the purchasing process. There are over forty so-called Flags of Convenience, which allows a yacht owner to flag his/her yacht in a country other than the Country of Ultimate Beneficial Owner’s citizenship. The Yacht will then fly the flag of that country.

The laws of the Flag of Convenience flag state offer many tax, crewing and operational advantages not offered by a true National Flag.

One of the principal benefits of flagging “offshore” is to reduce operating costs, avoiding higher taxes in the owners’ country of citizenship, and bypassing to some extent the laws that protect the wages and working conditions of mariners. The term “flag of convenience” has been used since the 1950s. A registry that does not have a nationality or residency requirement for ship registration is often also described as an open registry.

Keep in mind that according to the U.S. Coast Guard, only U.S. citizens can own U.S.-documented or flagged vessels. The situation gets a bit more complicated when it comes to corporate ownership and running your yacht as a business, as described above. Determining if a yacht run as an LLC or other corporate entity is considered a U.S. corporation or not, follows the same kinds of guidelines as making that determination for a land-based operation.

As an additional requirement, if the vessel seeks a fishery or coastwise endorsement, at least 75% of the stock interest in the corporation must be owned by U.S. citizens. However, even if you are a U.S. citizen, you do not have to register or flag your yacht as a U.S. vessel, and in fact, most yacht owners do not do so.

Where you decide to register or flag your yacht can have some complicated tax implications. For example, it may seem attractive to register your vessel in the Caymans as many yacht owners do, however, if the boat is registered “offshore” (i.e. one the 40 odd offshore flags which will accept Yachts for registry like, for example, the Cayman Islands) and the chartering company is owned under a foreign corporation, there may be various filing requirements for U.S. taxpayers.

The situation becomes more challenging for non-U.S. citizens. When a foreigner not domiciled in the U.S. dies owning U.S. situs property, they may be subject to the estate tax on the Owner’s death. Any U.S. situs assets with a value above $60,000 at the time of death may be taxed at rates up to 40% of the fair market value of the asset. Even when the foreign individual owns a boat through a U.S. entity, he or she might be subject to the Estate Tax depending on the type of corporate structure that is used.

These are just two examples of how involved this can become from a tax perspective and deciding where to register your yacht relative to your country of residence.

Where you decide to flag your yacht, regardless of your country of citizenship, is one of the most important decisions you can make when purchasing a luxury yacht, and it should not be done lightly nor without proper due diligence and financial and legal advice. Once your vessel is registered in a country, all the country’s laws will apply to your boat. Many countries that have attractive tax structures have other issues that you may still want to avoid, such as laws that determine the nationality of the crew you hire, and where the flagged vessel may, or may not dock.

A Yacht as a Second Home or Residence

An alternative strategy to operating your luxury yacht as a business but still being able to leverage some tax advantages is to see if it can qualify as a second home or residence if you are a U.S. fiscal resident.

To qualify as a second home, a boat must have at least one berth, a galley, and a toilet. Meeting this minimal qualification means that it can qualify for a mortgage interest deduction as a second home. According to IRS Publication 936, if it is missing even one of these elements, you cannot treat it as a second home, even if you “reside” there, making do with what it has and what it does not have.

If you combine the two strategies, in other words, rent your boat out at all, and want to claim it as a second home – then you must also prove “personal use.” You must document the use of the vessels for the longer of 14 days or 10 percent of the number of days you rent it out.

Remember, too, that for income tax purposes, you can only have one “second home.” If you already have a vacation home that you have been declaring as your second home on your tax filing, you will have to substitute your yacht for it. If you want to claim the mortgage interest deduction on the boat which is limited to interest on debt up to the first seven hundred and fifty thousand dollars.

How AbitOs and Moore & Company Can Help

The professionals at AbitOs and Moore & Company are happy to help, as we understand how important it is for potential yacht buyers, both US citizens and non-citizens, to understand the complex tax implications of purchasing, owning, and operating a luxury yacht.

As specialists in international taxation and maritime law, we are quite familiar with all the laws, regulations, and nuances of U.S. tax laws regarding yacht ownership. With the competent advice of knowledgeable CPAs and attorneys like ours, we can help determine if your yacht qualifies as an “active business” and is eligible to take advantage of the tax breaks mentioned in this article and even others that could be found in other sections of the IRS tax code.

If you are looking to buy a boat at this year’s show, or any time, please contact us; we would be happy to review your situation.

AbitOs specializes in the unique tax needs of high net-worth individuals with international lifestyles, LATAM, Canadian, and other non-US entities doing business in the US, as well as US entities doing business in those countries and across the globe . Buying a luxury yacht can be quite complex. If you would like to benefit from our expertise in these areas or if you have further questions on this Alert, do not hesitate to contact us .

Moore & Co. specializes in marine and aviation law and serves clients looking to buy or sell Yachts throughout the world. www.Moore-and-Co.com or contact Michael T. Moore at 786-473-0755 .

Related Professionals

Eric Glinsky, CPA, MST

Partner | Managing Member

Michael T. Moore

Search Help

Enter one or more keywords to search. Use quotes for “exact phrase.” Note that '*' and '?' wildcards are supported.

When your search results appear, you can refine your search further: Sort for only results in which all search terms appear AND/OR sort by chronological order.

Browse Recent Headlines
Browse by Issue Date
Browse by Topic
Endnote References
Sample Employer Plans
Time Tracking
Find a Tax Advisor
Expense Reports
Whitepaper Documents
Tax Season Resources
Home Office
Rent or Buy
Rental Property
Client Letters
Client Newsletters
Expense Reports for Clients
Tax Saver's Glossary
Helpful IRS Publications

Qualifying for tax deductions on a yacht or other luxury boat requires tax knowledge.

First, you need to use the yacht more than 50 percent for business transportation.

Once you meet the “more than 50 percent” test, your potential tax deductions include fuel costs, insurance, repairs, dock or slip fees, caretakers’ salaries, hurricane storage, and depreciation (including Section 179)—all of which are limited by tax rules on luxury water transportation.

Second, the yacht is an entertainment facility. Tax law treats entertainment facilities harshly, so you need to seriously consider providing no business entertainment on this yacht. This should be easy to do because business entertainment is no longer deductible, thanks to the Tax Cuts and Jobs Act (TCJA).

Use Your Yacht More Than 50 Percent for Business Travel

Already a subscriber?

Are you a tax professional (e.g., tax preparer or tax attorney)?

You'll be able to read the full article and get instant access to the last few issues of the Tax Reduction Letter

Buying a Boat

Do I Owe Taxes on My Yacht?

Boat Buying Process

This post is the beginning of a new series of articles from The Moorings Yacht Brokerage consisting of common customer questions. If you can't find the answers here contact one of our Brokerage Agents who are always happy to assist. In this article we find out what taxes are owed once a used boat is purchased from The Moorings. Taxes are a confusing subject and are dependent on several variables but our agents are well versed in the area and will help you navigate through these murky waters so buying your pre-owned yacht is that much simpler.

Will I owe taxes on my yacht purchase?

Whether or not you owe taxes at the time of purchase depends on where you plan to take the boat after closing. Many of the yachts we sell out of charter service are located in the Caribbean and we do not collect sales tax on the purchase at the time of closing. However if you are a Florida resident and bringing the boat back to Florida we can collect the tax at the time of closing and save you the hassle of dealing it upon your return. Florida charges a 6% sales tax, capped at $18,000, plus any applicable county surcharges.

If you do not bring the boat back to the US and begin your cruising immediately we will not collect any taxes at the time of sale. It is always recommended to check with your local municipality to find out about any applicable taxes in your particular instance.

More information here on Florida sales & use tax: http://floridarevenue.com/Forms_library/current/gt800005.pdf

What is the difference between import duty and sales tax?

As the majority of the yachts we sell are built outside of the US an import duty of 1.5% of the yacht’s value, based on the sales price, will be due when it reaches US waters. US waters include the territory of Puerto Rico, but not the USVI.

A boat can be registered or US Coast Guard documented yet never have been to US waters. Therefore import duty would still be due.

Sales tax is due to your local state, and is based on the value of the sale.

We recommend the use of an import agent to streamline the process with US customs for the import duty payment. Contact an agent for referrals.

What does “tax not paid” mean on some of your yacht listings?

Tax not paid refers to European VAT, which in general does not affect US or Canadian buyers in the Caribbean. If you are looking to buy a boat in the Mediterranean or the Exotics we also have a full service brokerage based in Nice, France that can assist with specifics to those markets.

Can I get out of paying taxes?

If you are a US buyer purchasing a boat in the Caribbean and do not bring the boat back to the US it is likely you will not be liable for sales tax at the time of purchase.

We always recommend checking with your local municipality if outside of the state of Florida, or with your personal tax advisor for your specific situation.

If I form an LLC can I avoid taxes?

No, the tax man cometh. There may be some tax advantages when you sell the yacht based in an LLC corporation, however it is best to consult your tax professional to help with that.

Still have questions about taxes? Contact a broker today, or see our boat buying guide here: https://www.mooringsbrokerage.com/moorings-yacht-brokerage-used-boat-buying-guide

Subscribe to Blog Updates

The Moorings Yacht Brokerage

850 NE 3rd St #201, Dania Beach, FL 33004

800-850-4081 / 954-925-4150

[email protected]

eList Newsletter Signup

Current Inventory

Selling Your Boat

Jeanneau Yachts for Sale

Beneteau Yachts for Sale

Leopard Catamarans for Sale

Sailing Monohulls for Sale

Sailing Catamarans for Sale

Yachts for Sale in Tortola

LIKE / FOLLOW

Tax Rules That Allow Tax Deductions for Your Yacht

Qualifying for tax deductions on a yacht or other luxury boat requires tax knowledge.

First, you need to use the yacht more than 50 percent for business transportation.

Use Your Yacht More Than 50 Percent for Business Travel

Tax law gives you two reasons to use your yacht more than 50 percent for business travel:

Possible escape from the entertainment facility rules (discussed later)
Escape from the penalties that apply to listed property

Tax law classifies yachts and other pleasure boats as “listed property.”1 Therefore, you must use your yacht more than 50 percent for business purposes in order to:

Qualify for accelerated depreciation
Qualify for bonus depreciation
Avoid depreciation recapture in later years
Qualify for Section 179 expensing and avoid recapture in later years

Say Goodbye to the Tax Law Entertainment Facility “Punishment”

Before the TCJA, even if you used your yacht 100 percent for business, one business entertainment use could sink your deductions.

But the TCJA did away with business entertainment tax deductions. That’s bad news, but not for the yacht where even a single business entertainment could have destroyed the deduction.

Planning note. The IRS in its regulations stated, “A facility used only incidentally during a taxable year in connection with entertainment, if such use is insubstantial, will not be considered a ‘facility used in connection with entertainment’ for purposes of this section or for purposes of the recordkeeping requirements of Section 274(d).”

Tax Deductions for the Business Transportation Yacht

The entertainment facility “punishment” does not apply to a yacht used solely for business travel.

Obviously, if the yacht is used solely for business travel, you don’t have any entertainment that triggers the entertainment facility rules.

For example, you could have a business office on an island and a business office on the mainland—say, in the Seattle, Washington, area—that would require water transportation for you to get to or from the island. You could do this on a yacht.

More Than 50 Percent

Here’s another real-life example. There’s a general insurance agent in Florida who takes his agents to three business meetings a year. One business meeting is in Bermuda, and the other two business meetings are in St. Thomas.

He gathers his agents—he’s a general agent, so he’s got some 25 other agents working for him—and piles them on his yacht and takes them to the meetings, which occur on land at a hotel. On these trips, he uses his yacht for business transportation. He never uses the yacht for business entertainment.

At the end of a typical year, he has 80 percent business use and 20 percent personal use of the yacht. He may deduct all of his yacht costs for the 80 percent business use, subject to the luxury water transportation limits discussed later in this article.

Possible Entertainment Facility Escape with Business Transportation

In 1978, lawmakers enacted the killer entertainment facility rules. Even though that’s a long time ago, there has not been much action in the courts or at the IRS on this subject.

There are a few cases that involve yachts. In one case, the court said:

The slightest use of a facility in connection with an activity which is of a type generally considered to constitute entertainment, amusement, or recreation operates under the text of section 274(a)(1)(B) to disallow any deduction as to that facility.

In another case, James Gordon argued that his boat was not an entertainment facility because he used it only incidentally during the year in connection with entertainment. He lost his deduction for the boat.

Fatal flaws. James Gordon and the others who lost their yacht tax deductions did not claim business transportation for their yachts. Had business transportation been part of the mix, the courts may have seen things differently.

IRS position. In TAM 9608004, the IRS ruled that the taxpayer who used his airplane 80 percent for business transportation and 20 percent for tax-deductible business hunting trips with customers could deduct 80 percent of his airplane.12 The one taint of entertainment did not hurt this taxpayer.

In this ruling, the IRS noted that the airplane fell under the non-deductible entertainment facility rules, but the IRS regulations contain a specific “carve-out” for business transportation. The IRS went on to note that an airplane used for both entertainment and business is deductible to the extent (not “if”) the airplane is used for business

transportation not related to entertainment.

Legislative history. Probably the best barometer is the legislative history behind the 1978 enactment of the killer entertainment facility rules, which says:

The Act provides that no deduction is allowed for any expenses paid or incurred with respect to a facility which is used in conjunction with an activity which is of a type generally considered to constitute entertainment, amusement, or recreation.

Generally, the term “facility” includes any item of real or personal property which is owned, rented, or used by a taxpayer in conjunction or connection with an entertainment activity. Thus, expenses incurred with regard to entertainment facilities which are disallowed include yachts, hunting lodges, fishing camps, swimming pools, tennis courts, and bowling alleys. Facilities also may include airplanes, automobiles, hotel suites, apartments, and houses (such as beach cottages and ski lodges) located in recreational areas. However, the deduction is not affected unless the property is used in connection with entertainment.

Expenses of an automobile or an airplane used on business trips will continue to be allowed.

. . . the disallowance rule does not apply to the extent allocable to that portion of the facility which otherwise qualifies as one which is not an entertainment facility, or to the extent that a facility, with respect to which expenses ordinarily would be denied as deductions, qualifies under one of the above exceptions. Similarly, expenses incurred

with respect to certain transportation facilities, for example, automobiles and airplanes, are allowable to the extent allocable to travel undertaken primarily for the furtherance of a trade or business even if the taxpayer engages in some entertainment activities during the business trip.

Recommendation—Plan A. Use the yacht only for business transportation and personal use. Do not use it for business entertainment. (The TCJA gives you the incentive to not use the yacht for business entertainment since you receive no deduction for such entertainment.)

Recommendation—Plan B. If Plan A is impossible and entertainment is part of the mix, hope that the IRS or a court will read the legislative history in a light favorable to your mixed use, as the IRS did for the airplane.

Tip for Plan B. When you have business and entertainment activities on the same day, try to ensure that the business part lasts longer than the entertainment part, so the day is obviously a business day. Alternatively, if entertainment time exceeds business time but the business time is a matter of consequence—for example, a contract signing—that day could be a business day. In short, try to arrange your activities so the law treats all days as business days.

Luxury Water Transportation Limits

Now that you have gone to the trouble to qualify your yacht for deduction, you face one final hurdle.

Tax law places a daily limit on deductions for business transportation by water. The luxury water limit is double the highest per diem for federal employees traveling in the United States.

The luxury water limits can change monthly. During 2020, the lowest luxury water travel limit was $760 a day and the highest was $988. Say that your yacht expenses exceed the daily limits and that you used your yacht 45 days for business transportation. At the lowest limit, your yacht deductions would be $34,200 (45 x $760). Not a bad payoff for a little tax knowledge.

If you are looking to deduct your yacht, make sure that you use it more than 50 percent for transportation and don’t use it for business entertainment.

Since the TCJA does not allow a deduction for business entertainment, your incentive is to not use your yacht for this purpose.

Once you qualify your yacht as a mode of business transportation, you next need to consider how the luxury water travel rules will limit your deduction.

My name is Christopher Ragain, I am the founder of Tax Planner Pro. I love helping small business owners find creative and legal ways to beat the TaxMan. My team and I love to write and you can find all of our insights on this blog!

Stay in Touch

Thank you! Your submission has been received!

Oops! Something went wrong while submitting the form

Navigare Yachting & Cookies

Navigare uses both our own cookies and cookies from third parties to be able to improve your experience on the website. We also use the information to evaluate the use of various functions on the site and to support the marketing of our services. We use cookies for the following: necessary features of the website, features that give you the best possible user experience on the site, statistics, web analytics and marketing.

By clicking "Accept All" you give consent to all areas of use. You can also choose which areas of use you want to give your consent to by clicking on “Manage Cookies” below. You can withdraw your consent at any time. Please click on "Privacy Policy" located in the footer of our site for more information on consent management.

About cookies

Tax strategies for yacht buyers

Are you an american taxpayer we will share several recommendations with you.

If you are an American tax-payer, you’ve probably stumbled upon the words “active yacht ownership” or "boat as a business". This post was written to help you better understand what this concept is and how it may apply to your situation. Additionally, there are other considerations you may want to discuss with your financial advisors outside of an “active business”.

Explore our ownership programs

What does yacht ownership have to do with tax deductions.

We point out and discuss the possible merits and challenges associated with the tax implications of owning a yacht.
The phrase “active yacht ownership” refers to the business strategy of purchasing a yacht and placing it into a charter program to generate income
Section 183 of the IRS code, also known as the “hobby loss rule”, limits the losses that can be deducted from income that are attributable to hobbies and other not-for-profit activities.

See the entire webinar

In this edition of our yacht sales webinar, the Navigare team discusses tax planning for yacht buyers looking to place their yacht in charter with Giselle Alexander. Giselle Alexander is a Certified Tax Law Specialist, a CPA, and holds a Masters in Law in Taxation. After transferring from a Big-4 accounting firm, she transitioned into tax controversy. As a member of the prevailing legal team for the landmark case, Kline vs Commissioner, Giselle Alexander is at the cutting edge of the IRS rules for the business of placing yachts in a charter fleet and running an active business. Listen in to hear her recommendations and hear her answer to your most common questions!

While we point out and discuss the possible merits and challenges associated with the tax implications of owning a yacht, this is not intended to provide tax advice, as only a professional accountant or financial advisor acting in a fiduciary capacity should advise you. If you are looking for a reputable CPA to assist you with your decisions surrounding a yacht purchase or making your boat available for charter, please contact Navigare Yachting and we will share several recommendations with you.

DO YOU HAVE QUESTIONS? ASK US!

For instant response Chat with us! Just click on the chat and you are closer to a Yacht! Or

Business structure

How you choose to run your business, whether in your name or through a dedicated corporation, will have an impact on the depreciation you can take if any. The choice is yours, however holding title to the yacht in a corporate entity, either an LLC (limited liability company), partnership, or corporation, for example, reduces your legal exposure and financial risk. Holding title through a legal entity may also trigger tax consequences and advantages not available to individuals. However, notwithstanding the potential tax benefits, most yacht owners will choose an LLC or another Corporate entity to reduce their liability associated with the yacht.

What is active yacht ownership?

The phrase “active yacht ownership” refers to the business strategy of purchasing a yacht and placing it into a charter program to generate income, thus reducing the cost of yacht ownership. Generally, the program allows for some personal use of the yacht at the discretion of the owner. In some circumstances, additional tax credits are available beyond the “traditional” deduction of day-to-day business expenses. These tax benefits may vary and may or may not apply to your particular situation. To verify your active participation in the business, the IRS has defined several criteria that one must meet before the additional deductions may be legally taken. These criteria include, but are not limited to:

The ability and intent to make a profit (this is called the “hobby loss rule”, explained below)
The owner must perform at least 100 hours of work on the business each year, and more than any other person related to the yacht’s activity (for purposes of the 100-hour test, a taxpayer’s spouse’s participating in the activity is also treated as participation by the taxpayer).

Such hours of work constitute “material participation” in your business and may include:

attending a boat show, and
maintaining the business’s website and promoting the business online, and
travel for physical inspection of your yacht as well as testing of the vessel and its systems, and
getting to know the intended sailing grounds where your yacht will be placed to promote your charter business.

Active Participation is very different from passive activity (such as long-term real estate rentals). Generally, any rental activity is deemed a passive activity, without regard to what extent the taxpayer participates in the activity. However, your yacht business is not considered a rental activity if:

The average period of customer use for the yacht is seven days or less;
The average period of customer use for the yacht is 30 days or less AND significant personal services are provided on behalf of the yacht owner for making it available for use by customers.
Extraordinary personal services are provided by or on behalf of the owner of the yacht in connection with making the yacht available for use by customers.

Expensing through Section 179

One of the most well-known incentives available when actively participating in a business is a section of the IRS code called “Section 179”. It was designed to help small businesses as they set out to buy or lease new or used equipment. It allows a taxpayer to deduct the cost of certain types of property (such as a yacht) on their income taxes as an expense, rather than requiring the cost of said property to be capitalized and depreciated. As of January 1, 2018, under section 179(b)(1), the maximum deduction is capped at $1,000,000 per year. This means that a taxpayer may elect to deduct up to $1,000,000 of the value of the yacht per year. If you adhere to the IRS guidelines and get the competent advice of a knowledgeable CPA, your charter yacht operations may qualify as an active business eligible to take advantage of this and other sections of the IRS code.

The hobby loss rule (Section 183)

Section 183 of the IRS code, also known as the “hobby loss rule”, limits the losses that can be deducted from income that are attributable to hobbies and other not-for-profit activities. In general, losses which occur in for-profit activities are not limited and can be used to offset other income from other activities. But the Section 183 limitation curtails those deductions when the activity has been deemed a hobby. It is generally accepted that if one generates a profit 3 out of 5 years, the activity is not considered a hobby. However, the code does not state that a profit MUST be made for 3 out of 5 years to clear the hobby loss rule. Therefore, your business must demonstrate “the ability and the intent” to make a profit. Expert accountants make recommendations on how to justify the “ability and intent” to generate a profit while running a business of yacht charters. Demonstration of “ability and intent” can be shown through careful research before starting a charter activity, and demonstrated by drafting a thorough business plan, documenting charter and non-charter activities rigorously, keeping accurate books of account, and also actively promoting the yacht available for charter. Since each tax situation is unique and varies from year to year, we advise all of our clients to seek proper professional assistance on this matter before engaging in the charter activity.

Did you know we have a Holiday program?

NAVIGARE HOLIDAY PROGRAM

Claiming depreciation within your for-profit boat activity

As explained above, expensing under Section 179 of the IRS is the most accelerated form of depreciation. Section 179 allows a taxpayer to expense (or deduct as a current rather than a capital expense) up to their basis in the vessel, currently capped at $1 million per year, of the total purchase price of new and used qualified depreciable assets it purchases and places in service in 2018, with certain limits. Those unable to claim this allowance may recover the cost of qualified assets over longer periods, using the depreciation schedule from Sections 167 or 168. The special allowance under Section 168 has become known as “bonus depreciation”. Note that it is only applicable if the yacht owner and taxpayer did not use the property before its acquisition and did not acquire the property from a related party. Additionally, a yacht is considered qualified property since it has a recovery period of 20 years or less, however, Section 168 will only apply to a new yacht.

At-risk rules

Section 465 of the IRS code limits losses that may be deducted by certain taxpayers engaged in covered activities under section 465. The at-risk rules apply to the leasing of depreciable personal property, including boats and yachts. Any loss from the covered activity for the year is allowed only to the extent the taxpayer is at-risk concerning the activity at the close of that year.

Alternative strategy: boat as a second home

Should the active business route not suit your sailing program or your circumstances, the second home qualification may be of interest to you. A watercraft that has at least one berth, a galley, and a toilet can qualify for a mortgage interest deduction as a second home. However, deductions are limited for rentals of a second home used for personal purposes:

If renting out the second home (yacht), the taxpayer must use it himself/herself for the longer of 15 days or 10% of the number of days the yacht is rented out.
If a boat is not a personal residence because there are too many rentals or two few personal-use days, it is treated as a rental property and all expenses, including interest, are allocated between rental use and personal use. The personal use portion of the interest expense is not deductible because the property fails to qualify as a residence.

Expenses attributable to rental use are deductible but are subject to the passive, activity, hobby loss, and at-risk limitations described above.

Exit strategy

Prospects looking to purchase a yacht and place it into a charter program should also prepare their exit strategy. It’s critical to understand ahead of time the consequences of terminating the program you've engaged in; one of the most significant events being the recapture, or repayment of certain deductions, at the time you resell your yacht.

Independent advice

Another factor looked at by the IRS in their analysis of how to treat your business, is whether the yacht owner sought independent tax advice outside of the charter operators that promoted the yacht sale in the first place. Therefore, we urge our clients to obtain the expert guidance of a CPA who can walk them through their options and prepare them for a potential tax audit. Many brokers and yacht management companies do not disclose all of the risks and uncertainties of owning a yacht as a business. Very few charter arrangements will satisfy the IRS requirements, and tax audits can be detailed and onerous! Should you need further assistance, please contact us, we would be delighted to speak with you and your CPA about creating a charter program well suited to your unique needs.

Additional resources

For more information, please review the following. We do not undertake to provide any advice on your tax situation, but these links could help you ask the right questions of your CPA or other tax professional. Please note that the tax code regulations and tests are updated and amended by the IRS regularly, and therefore we recommend that you speak to a tax and legal professional for more information on any of these topics.

Boatinglaw.com, Checklist for Significant Vessel Purchase http://www.boatinglaw.com/maritimearticles/purchaseofavessel.html

IRS Publication 925 – Active vs. Passive Activity https://www.irs.gov/pub/irs-pdf/p925.pdf

Section 179 (26 U.S.C.A. §179) https://www.law.cornell.edu/uscode/text/26/179

Section 168 (26 U.S.C.A. §168) https://www.law.cornell.edu/uscode/text/26/168

IRS Publication 936 - Boat as a Second Home https://www.irs.gov/pub/irs-pdf/p936.pdf

Inquire About Yacht Ownership

Request info, yacht ownership request.

Boat Reviews

Boats Specs
Marine Pros
Boat Insurance
Boat Warranties
Boat Transport
Boat Towing
Marine Forecasts

Your Ultimate Boating Resource

Boat Taxes and Deductions: What Every Boater Should Know

Whether you are a recreational boater, a liveaboard, or a commercial vessel operator, taxes are an essential aspect of boat ownership to consider. Navigating the ins and outs of boat taxes and deductions can be confusing, but understanding the basics can save you money and potential headaches. In this article, we will cover various tax implications, eligible deductions, and provide tips to help you make the most of your boat-related tax situations.

Sales and Use Tax

Most states in the U.S. impose a sales tax on the purchase of boats, which is generally calculated based on the purchase price. Rates vary by locality, and certain states may also charge a use tax if you plan to use your boat within their waters. The use tax is applied in the absence of sales tax or when sales tax paid in another state is lower than the use tax rate in the state the boat is being used in. Be sure to research the specific tax requirements in your state or locality, as these laws can change frequently.

Personal Property Tax

Boat owners who live in states with personal property tax laws may be required to pay an annual tax on their vessels. These taxes, as with sales and use taxes, vary between jurisdictions and are based on the assessed value of your boat. Some states offer exemptions or credits for specific types of boats, so be sure to check the laws in your area.

Federal Income Tax Deductions

Many boat-related expenses can be deducted on your federal income tax return, which helps offset the costs of ownership. Some of these deductions may include mortgage interest, business-related expenses, and even educational costs associated with boating.

Mortgage Interest Deduction

If your boat qualifies as a second home, you may be able to deduct the interest paid on your boat loan. To qualify, your boat must have a sleeping area, a toilet, and cooking facilities. It is essential to keep detailed records of these expenses and check the latest guidelines from the Internal Revenue Service (IRS) to ensure your boat meets the requirements.

Business Expenses

If you use your boat for business purposes, such as chartering, you can deduct various expenses, including maintenance, slip fees, fuel, and even depreciation. It is crucial to keep detailed records of your expenses and usage to substantiate your deductions if you face an audit. Consult a tax professional to ensure you are maximizing your deductions while complying with tax laws.

Education Expenses

Boater education can sometimes be tax-deductible, depending on the nature of the education and its relevance to your job or business. For example, the cost of a Coast Guard Captain’s License course is often tax-deductible for those who use the license for business or employment purposes. Be sure to consult a tax professional to determine if your boating education expenses qualify for a deduction.

Local Fees and Taxes

In addition to the taxes mentioned above, there may be local taxes and fees to consider, such as registration fees, marina taxes, and waterway access fees. These costs will vary depending on where you use and store your boat, so be sure to research the requirements in your specific location.

Tax Tips for Boaters

Keep Detailed Records

Maintain accurate records of all boat-related expenses, including receipts and invoices, to substantiate your deductions and prevent potential issues during audits.

Consult a Tax Professional

Tax laws can be complicated, and every boater’s situation is unique. Engage a tax professional who is familiar with marine-related tax laws and deductions to ensure compliance and maximize your savings.

Plan for Tax Season

Be proactive in your tax planning by understanding your boat-related tax obligations and preparing for any potential tax liabilities.

Boating is a cherished pastime for many and knowing the tax implications associated with boat ownership can save you money and avoid potential compliance issues. By understanding the various state, federal, and local taxes that apply to your boat, taking advantage of eligible deductions, and following best practices for tax planning, you can enjoy your time on the water while keeping Uncle Sam happy.

Overview of the 2024 sea-doo rxp-x 325, overview of the 2024 parker offshore 2900 cc, what your boat’s beam is and why it matters, power cats of 2024: ultimate guide to the top power catamarans this year, navigating the heat: 10 safety tips for a safe boat ride in the summer heat, latest posts, don't miss, our newsletter.

Get the latest boating tips, fishing resources and featured products in your email from BoatingWorld.com!

What type of wood is used for pier pilings?

What is the difference between a dock and a floating pier, what is the proper technique for pulling a beginner wakeboarder, what does ‘no wake’ mean on a lake, what is the difference between wash and wake, highs, lows, and tidal know-how: a deep dive into ocean currents, 10 essential tips for fishing near private property, the benefits of using a drift sock: guidance for anglers, lure fishing: secrets for imitating live bait and attracting fish, explore the untapped depths of america’s best bass fishing spots, outboard motor maintenance: tips for keeping your engine in top shape, the essential boat tool kit: tools every boater needs, diy boat building: 8 tips and tricks for building your own vessel, the art of miniature maritime craftsmanship: ship in a bottle, antifouling paints: a guide to keeping your boat shipshape, beginner’s guide to standup paddle boarding: tips and techniques, boating for fitness: how to stay active on the water, kayak safety: how to stay safe on the water, anchoring in a kayak or canoe: how to secure your small boat, overview of the 2024 yamaha 252sd, overview of the 2024 tiara yachts 48 le, overview of the 2024 bass cat jaguar sts, 2024 pursuit os 445: an overview, 2024 aquila 47 molokai review, 2024 sea-doo switch 13 sport review, gear reviews, megabass oneten max lbo jerkbait review, fortress anchors fx-7 anchoring system review, fortress anchors fx-11 anchoring system review, fortress anchors commando anchor kit review, fortress anchors aluminum anchors review, stay in touch.

To be updated with all the latest news, offers and special announcements.

Important Financial & Tax Information for Yacht Crew

The information within this article has been provided by Patrick Maflin, Director of Marine Accounts

On the 1st July 2017, the new French Social Security laws will be implemented. This will impact yacht crew who spend over 183 days within a 365 day period in France, as long as they are not already paying social security to any EEA state or any state which has a bilateral social security treaty with France. While the USA and Canada do hold a bilateral social security treaty with France, it is worth noting that Australia and New Zealand do not. USA – Financial & Tax information for US Yacht Crew Taxes under the Federal Insurance Contributions Act (FICA) are split into two contributions. The first, Social Security, is paid as a percentage of earnings up to $127,200 for 2017 income (this figure changes each year). The current percentages for Social Security are 6.2% paid by both the employer and the employee; or 12.4% paid by self-employed individuals. The second, Medicare tax, is paid at a rate of 1.45% by both the employer and the employee; or 2.9% paid by self-employed individuals; however once an individual reaches earnings of $200,000, the employer is responsible for withholding an Additional Medicare Tax of 0.9%. In the case of a married couple filing jointly, the Additional Medicare Tax is owed after a cumulative earning of $250,000 or $125,000 if filing separately. For self-employed individuals the Additional Medicare Tax is also 0.9%.

The US has entered into Totalization Agreements with several Countries in order to avoid double taxation of income (in respect to Social Security taxes). This means that when a US Citizen or Resident is working in one of these countries, they may be given “credit” towards their future US Social Security payments for the amounts they contributed to the other countries system. However if they work in a country not entered into a Totalization Agreement with the US and they are not eligible for Foreign Earned Income Exclusion, they will likely owe FICA taxes on any income.

Australia – Financial & Tax information for Australian Yacht Crew Under Australia’s Superannuation System, employers have to contribute 9.5% (with plans to increase the contributions gradually up to 12% between 2021 and 2025) of wages into the employee’s chosen Superannuation Fund. Employees may then voluntarily contribute further to their fund, with possible tax benefits for doing so. A non-resident may contribute to a Superannuation Fund at 15% income as long as they have a Tax File Number (TFN). Without a quoted TFN they will be taxed at 49%.

New Zealand – Financial & Tax information for New Zealander Yacht Crew KiwiSaver takes minimum 3% of gross income from employees, with employers contributing the same amount on top. If the employee is a resident of NZ the government will make additional contributions to the account. After 12 months of contributions an employee may choose to take a “contribution holiday” lasting up to 5 years, which exempts them from contributions for the duration of the “holiday”. During this time employers are not required to make compulsory contributions but employees may still choose to make voluntary contributions.

UK – Financial & Tax information for UK Yacht Crew In regards to National Insurance, you will first need to identify whether you are liable to pay class 1 NI. HMRC’s Mariners questionnaire is used to determine whether you should be paying class 1, or if you are entitled to pay class 2 (at the reduced rate). You are liable for class 1 NI if either of the following apply to you: -You work for or are paid by a company based in the UK -You work on a vessel registered in the UK or the Isle of Man for an employer based in the European Economic Area (EEA) or in a country that has a reciprocal agreement with the UK. If you are not liable to pay class 1 NI, then there are 2 possible voluntary classes that you may be eligible to pay: Class 2,Under Mariners contributions, which is £2.80 per week, or Class 3, at the higher rate of £14.10 per week. Both of these allow you benefits such as access to the NHS and State Pension.

*There are provisions within the new decree which allow for seafarers to opt out of making contributions in France providing this is implemented before the 1st July. These exemptions are based on whether the seafarer is already making contributions to another country’s social security agency. The Decree highlights the following territories and countries as qualifying for such an exemption; EU/EEA/Switzerland and countries with which France has a bi-lateral social security agreement. Australia and New Zealand do not have a bi-lateral agreement with France.

Some Australian and New Zealand seafarers may have dual nationality with the UK, which may give them the right to make social security contributions. Such a right will only be granted where there is a connection to the UK such as “domicile of origin” as published by HMRC. At this moment in time ENIM, the French social security agency for seafarers is yet to complete its “implementation” meetings at which they will decide on exactly how to operate the Decree, so there may well be further clarification on contributions made to countries that are not on the list published in the Decree. However at this stage we do not know enough detail to comment with any authority. None of the above constitutes legal or tax advice.

*Information provided by John Cook of Lesia Employment Services ICC Limited

Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.

Got a Question?

Complete our short form for a prompt response and world class tax advice.

Yes please contact me regarding mortgages

By selecting this, you agree to the Privacy Policy .

Sign in to your account

Yacht crew tax & financial information - your ultimate guide.

Image source: https://pixabay.com/photos/euro-banknotes-hand-holding-money-867410/

Whether you’ve worked in yachting only a few months or many years, it’s guaranteed you’ll have questions surrounding finances, tax obligations and personal concerns to get the most from your off shore income.

Whilst many in the yachting industry find themselves in the unique position of having a high income and low expense lifestyle, a career in yachting can often be fruitful but short.

This makes it all the more important to begin arranging your affairs to maximise the benefit of this income now.

By taking a few simple steps, you can ensure you feel the long-term benefit of the unique position and secure a better future.

In the following chapters, we outline 7 key considerations whilst being employed on a ship.

Simply click on the links below to be taken straight to the chapter that interests you, or read the whole “ultimate guide” to be as fully informed as possible:

Yacht Crew Salaries

Living expenses, bank accounts, savings & investments, social security, tax obligations.

Roles within the yachting industry often come with a generous salary.

Whilst a deckhand cannot realistically expect to earn as much as the captain, it’s usually said everyone on board will do pretty well for themselves.

Your salary will be dependent on a number of factors including:

type of vessel
past experience
qualifications
end of season bonuses
performance based incentives
the vessel’s route
your relationship with the owner
guest & charter tips

It’s not uncommon for crew to be offered an end of season bonus, which many put aside into savings or choose to invest.

SY Ranger for example, famously had one of the best retention packages in the industry, where crew received an additional months pay for every year of service.

The following infographic below gives a fairly good measure of the salary ranges expected by various jobs on board a super yacht:

On top of your salary, you can often expect your living expenses to be covered whilst on board.

The fact that your employer covers food, accommodation and other essentials, often leaves crew with a large disposable income.

Again, there are dependent factors, but it’s not uncommon for experienced crew members to have travel expenses to and from the yacht reimbursed as well!

For those taking their firsts steps into yachting, having the right type of bank account to be paid a salary into should be a top priority.

Being paid wages into a domestic, single currency bank account can often be a huge mistake.

Retail banks at home will generally not accept multiple currency deposits and you may find you lose money to the bank through poor exchange rates or high conversion fees.

For this reason, the savviest employees open an offshore multi-currency account with a provider such as the following:

Standard Bank

These accounts are designed to hold multiple currencies and are great for paying salaries into.

However, you’re advised to learn more about why leaving your hard-earned cash in one for an extended period is not advised, by reading our article about International Account Myth Busters .

Image source: https://pixabay.com/photos/piggy-bank-money-cow-dollar-bill-3297061/

You’ll find most employers provide medical & health insurance to cover costs for injury or sickness, which are vital whilst overseas.

This provision is assumed to be fairly standard throughout the industry, but it’s not always the case and is worth taken into account before you accept any role.

If you fall ill or become injured whilst away and are not covered by your employer’s insurance policy, you may find overseas medical bills very expensive.

Even if you’re covered by your employer’s health & medical policy, there’s other forms of insurance you may need to consider.

For example, long-term absences due to sickness or injury are unlikely to be covered by sickness pay.

In order to guard against this, you should consider a payment protection insurance plan, which covers you for loss of earnings during your time off.

Various people take differing approaches to how they save and invest their money whilst employed in the yachting industry.

For example, there’s a great number who take advantage of the well paid lifestyle by investing large sums in stocks & shares, property or many other options as early as possible, to enable them to leave the industry quickly.

There are others however, who choose to leave thousands of pounds worth of currency sitting in offshore accounts, gaining zero interest!

Remember - leaving money in an account accruing 0% interest for an extended period of time actually means the value of the savings will decrease due to rises in inflation.

If this is a situation you find yourself in, you are advised to act quickly.

Read our article to learn 5 ways to make your end of season savings work and avoid currency depreciations.

For social security matters, each jurisdiction has different parameters regarding your obligations to pay and the benefits you receive in return.

Some countries like France, insist that you must contribute if you spend more than 181 days on a vessel in French territory, whilst others give you the option to make voluntary contributions if you wish to.

Depending on the jurisdiction, your contributions can cover a number of benefits, which could include the following:

State pension
Payments to support you when out of work through sickness etc.
Widows/Widowers benefits
Maternity/Paternity payments

Due to recent changes in the French system, social security is a hot topic of conversation amongst yacht crew and yacht owners.

As a consequence, many have avoided French territories for this precise reason.

Under the new system, you’re obliged to make payments if you qualify under either of the following tests:

You will be obliged to contribute if you or your vessels spend more than 181 days in France or French waters in any calendar year.

You will be obliged to make contributions if you qualify as a French resident for tax purposes.

As it stands, it is the responsibility of the captain or vessel owner to ensure all crew are compliant with French social security laws.

So you should be notified if you’re liable, and may find contributions are taken by your employer at source.

If you think this applies to you, you can read more around the subject of common French social security questions in our recent blog post.

Image source: https://pixabay.com/photos/money-bills-calculator-save-256312/

For many years, crew all over the world have been being paid into offshore accounts, with tax authorities being none the wiser.

Unfortunately, this is no longer the case.

With the introduction of the Automatic Exchange of Information and Common Reporting Standard in 2014 , any participating tax authority can now request your bank gives them full details of all your holdings, both onshore and offshore.

For this reason, it has become all the more important that you have a strong understanding of your residency position, which will dictate your obligations in declaring income.

If you are ruled to be tax resident of any country, you are obliged to declare your income from any source worldwide, which of course includes your yachting salary.

If you become the subject of an investigation and are found to have failed to declare income whilst being a tax resident under the laws of a relevant jurisdiction, most authorities will expect payment of penalties and fines or interest for late payment.

The only sensible course of action is to fully assess your residency position and voluntarily disclose your income from work and investments, before any authorities ask.

By doing so, you’re demonstrating that you’ve made every effort to remain tax transparent and to fulfil your obligations.

Most authorities will take a much kinder view on those that do, than those that don’t!

Each jurisdiction has different tax laws, with some being more forgiving than others when it comes to taxation placed on your income from yachting.

Below we summarise the differences for each including the UK, USA, New Zealand and Australia:

UK Yacht Crew Tax

The UK system is one of, if not the most forgiving in terms of tax on income from yachting, and as such is one of the most appealing tax residencies.

Through the HMRC’s Seafarers Earnings Deduction (SED), UK yacht crew can declare their income from yachting with a 100% exemption from tax.

To gain 100% tax exemption, you must qualify as a UK tax resident (or EEA resident with no other tax residency) under the Statutory Residency Test, with the special circumstances of seafarers accounted for in the legislation.

Whilst there’s other parameters you must adhere to, the most important one to observe in order to qualify is the limit of 183 days spent onshore in the UK in any rolling 365-day period.

For more information, read our detailed article covering all aspects of the Seafarers Earnings Deduction tax exemption.

US Yacht Crew Tax

The US tax system offers a tax-free amount, which can be earned by US tax residents through the IRS’ Foreign Earned Income Exclusion (FEIE).

This is adjusted annually with earnings up to $104,100 qualifying for the 2018 tax year.

In order to qualify under the FEIE, you need to work and live outside the US and pass one of two tests:

a) Bona Fide Residency Test

You can qualify as a bona fide resident of a foreign country if you reside there for a period, which covers one whole tax year.

The US tax year runs from 1st January – 31st December.

Leaving the country for vacations will not affect your qualification however, you must not submit paperwork notifying them of your presence as non-resident.

b) Physical Presence Test

To qualify for FEIE under this test, you must be present in a foreign country for at least 330 days in any period of 12 consecutive months.

Any declared days spent overseas must cover the entire 24-hour period of said days, so departure and arrival days for example don’t count.

It’s also important to remember that under FEIE, a day spent in international waters also counts as a US day.

Australian Yacht Crew Tax

Australian crew are in the unfortunate position of suffering some of the harshest and most outdated residency laws you’ll find anywhere in the world.

You’ll be subject to the 3 statutory residency tests below:

a) The Domicile Test

You're considered an Australian resident if you’re domicile (the place that is your permanent home or place of your fathers’ birth) is in Australia.

To overcome this test, you must set up a permanent home overseas.

b) The 183 Day Test

If present in Australia for more than half the income year, whether continuously or with breaks, you are said to have a constructive residence in Australia.

To overcome this rule, you need to establish that your usual place of residence is outside Australia and you have no intention of taking up residence back home.

Under this rule, a traveller could feasibly be ruled tax resident unless they can evidence that they have a home elsewhere and have no intention to return to Australia to live.

c) The Superannuation Test

You’re considered a resident of Australia if you are still contributing to a superannuation scheme.

For more information, read part one of a two-part series on Australia’s tax laws and yachting .

New Zealand Yacht Crew Tax

New Zealand residency tax laws are simple and easy to work with.

If you wish to establish a position of non-residency and not have to pay tax on your earnings, you’ll need to qualify via the following tests:

a) 325-Day Rule

You must first establish an initial qualifying period for non-residency of 325 days outside the country in any 365-day period.

These days do not have to be consecutive, so you’re welcome to visit home at any point.

But it’s important that you keep good records of your whereabouts and movement including flight stubs, train tickets and even receipts as evidence of your time spent overseas.

b) 183-Day Rule

Once you’ve established your initial qualifying period of 325 days outside New Zealand, you can then maintain your qualification by not spending any more than 183 days in the country in any 365-day period.

If you break the 183-day threshold, you will need to re-qualify by spending 325 days overseas in any 365-day period.

c) Permanent Place of Abode (PPA)

If you wish to establish non-residency of New Zealand, you must not have a home which is permanently available to you to live in the country.

Under this rule you may still be ruled resident, even if you have spent the necessary time overseas.

A room, which can be used on a temporary basis at a friend or family members’ house, will not be considered a PPA, nor will an investment property in which you don’t spend time.

Speak to Us or Comment!

As you can see, tax residency laws vary across numerous territories, so it's important to know your position early on and what your obligations are.

We'd love to know your thoughts on this article or any questions you might have.

Just leave a comment in the section below or alternatively, contact us if you need professional advice on your yachting income tax obligations.

Before you go...

You're about to visit a page on our legacy site. We're currently in the process of updating all our tax tools and while this page is still active please return to the main Marine Accounts site after completition.

Refer a friend and receive £50!

Upon successful completion of the referral the cash will be transferred to you.

The global authority in superyachting

NEWSLETTERS
Yachts Home
The Superyacht Directory
Yacht Reports
Brokerage News
The largest yachts in the world
The Register
Yacht Advice
Yacht Design
12m to 24m yachts
Monaco Yacht Show
Builder Directory
Designer Directory
Interior Design Directory
Naval Architect Directory
Yachts for sale home
Motor yachts
Sailing yachts
Explorer yachts
Classic yachts
Sale Broker Directory
Charter Home
Yachts for Charter
Charter Destinations
Charter Broker Directory
Destinations Home
Mediterranean
South Pacific
Rest of the World
Boat Life Home
Owners' Experiences
Conservation and Philanthropy
Interiors Suppliers
Owners' Club
Captains' Club
BOAT Showcase
Boat Presents
Events Home
World Superyacht Awards
Superyacht Design Festival
Design and Innovation Awards
Young Designer of the Year Award
Artistry and Craft Awards
Explorer Yachts Summit
Ocean Talks
The Ocean Awards
BOAT Connect
Between the bays
Golf Invitational
BOATPro Home
Superyacht Insight
Global Order Book
Premium Content
Product Features
Testimonials
Pricing Plan
Tenders & Equipment

US slams EU plans to double 25% yacht import tax

American yacht and engine builders have again called on the Biden administration to step in and stop a 25% EU tariff on yacht and engine imports from doubling to 50% next month.

To continue reading... you need to register...

Register for FREE unlimited access to all BOATPro News content

Gain FREE access to industry analysis, interviews with marine industry leaders and all the latest news as it happens.

From our partners

Still need to file? An expert can help or do taxes for you with 100% accuracy. Get started

Understanding the Tax Implications of Superyacht Tips

High Seas: Understanding the Tax Implications of Superyacht Tips

Do I have to pay taxes on prize money?

If you win a cash prize from a game show or a reality TV competition, you will need to include that prize as part of your income on your tax return – regardless of the amount.

The IRS even considers noncash prizes as part of your income. Let’s say you won a new house or a vacation – you would have to include the fair market value of that prize as other income on your tax return.

Will I have to pay taxes in the United States and a foreign country while working as a crew member on a yacht?

The amount of taxes you pay to the United States and/or a foreign country will depend. The United States has tax treaties with many foreign countries to reduce the rate of tax or exempt foreign taxes on certain items of income.

Crew members (and other taxpayers alike) may be able to claim a credit for certain taxes paid to foreign countries against the US federal taxes they owe when filing their taxes.

However, it is important to meet with a tax expert to determine your tax home . If your tax home is in a foreign country, you may qualify for Foreign Earned Income Exclusion, but one of the requirements is that you must meet the physical presence test. Meaning you must be physically present in a foreign country (or countries) for at least 330 full days during any 12 month period.

If you meet all the requirements to claim the Foreign Earned Income Exclusion when you file your tax return the maximum that you can exclude is the lesser of the foreign income earned or $120,000 per person for 2023.

When are my taxes due if I am living abroad?

If you are an American (or US resident) living in the United States your federal income tax return for 2023 is due April 15, 2024.

If you are an American (or US resident) living abroad, you are granted an automatic additional two-month extension for filing your U.S. federal tax return.

Maybe you aren’t a crew member working on a superyacht, but have your own boat (or future plans for one) there are also tax benefits you could qualify for.

How do taxes work if you live on a boat?

A boat can qualify as your primary residence or a second home as long as it has sleeping accommodations (berth), a bathroom (head), and a kitchen (galley). You can take a mortgage interest deduction if your boat is financed.

If you were self-employed, you could even take a home office deduction if you had a dedicated workspace from your boat.

Navigating the waters of the sea and your taxes as a yachtie can be intricate, but with careful planning and the right expertise you can steer your financial ship to smoother waters.

So whether you’re a deckhand or an armchair captain – living vicariously through the TV screen, always keep an eye on the horizon and the tax challenges to come. Fair winds and smooth tax sailing!

But don’t worry about knowing these tax rules. Meet with a TurboTax Full Service Expert who can prepare, sign, and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.

TurboTax Goes Behind-the-Scenes at the #NIL Summit

1099-MISC vs 1099-NEC vs 1099-K: Understanding the Differences

Written by Katharina Reekmans

Katharina Reekmans is an Enrolled Agent and a contributor to the TurboTax Blog team. Katharina has years of experience in tax preparation and representation before the IRS. Her passions surround financial literary and tax law interpretation. She has a strong commitment to using all resources and knowledge to best serve the interest of clients. Katharina has worked as a senior tax accountant, operations manager, and controller. Katharina prides herself on unraveling tax laws so that the average person can understand them. More from Katharina Reekmans

Studying Abroad This Fall? Make Sure You Know These Tax…

Latest News

Understanding the Tax Implications of Strikes on Worker…

The High Tea on Tax Implications Before and After #Suss…

Golden Globe Swag Bags: What Are the Tax Implications?

Self-Employed

5 Tax Implications and Tips if You Flip Things for Prof…

Intuit TurboTax April Report A Look at Refunds and Shifts in the Child Tax Credit (411 x 600 px) (2)

Intuit TurboTax April Tax Trends Report: A Look at Ref…

401K, IRA, Stocks

What Happens to Employees When a Company Goes Public?

The tax implications of receiving a holiday bonus.

Income and Investments

Gambling Winnings Tax (How Much You Will Pay For Winnin…

IRS Provides Further Guidance on the Taxation of Virtua…

By SuperyachtNews 24 Nov 2020

IRS Tax Code - Section 179 deduction

James neocleous of jaffa & co., on an emergent tax benefit that may be of interest to us superyacht clients….

This briefing note explores a tax benefit available in the USA for owners of new and used yachts. This tax benefit may assist existing members of the superyacht and aviation industries and may well entice those who are yet to enter the market.

Businesses in the USA may be able to benefit from Section 179 of the of the Internal Revenue Code and deduct the full purchase price of certain qualifying equipment from their gross income.

The Tax Benefit

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year (the “Section 179 Deduction”). That means that if you buy (or lease) a yacht or aircraft, you may be able to deduct the full purchase price from your gross income for the year.

The deduction limit for 2020 is $1,040,000.

The spending cap for 2020 is $2,590,000. The deduction begins to ‘phase out’ on a dollar-for-dollar basis after $2,590,000 is spent by a given business. The entire deduction will cease to be available if a business reaches $3,630,000 in purchases.

These limits may increase for the year 2021, in line with inflation, although we understand clients are keen to utilise the exemption before the forthcoming change in Presidential administration.

It is clear that the Section 179 Deduction is aimed at benefitting small to medium sized businesses and assets, given the price limitations.

In order to utilise the Section 179 Deduction, certain criteria must be met, including the following:

1. The buyer, and registered owner, must be an entity such as a corporation, partnership, or LLC.

2. The yacht must be used for a legitimate business purpose, such as chartering.

3. The yacht can be new or used; the important point is that it must be “new to you”.

4. The yacht must be acquired in an “arms-length” transaction or financed with certain qualified leases and loans.

5. The yacht must be put into service in the same year that it was purchased.

Further, the asset must be used for business purposes at least 50% of the time. The depreciation limits will be reduced by an amount corresponding to the % of time that the vehicle is not used for business use.

The Section 179 Deduction will also cover the purchase of upgrades and improvements to the asset. This includes, for example, upgrades to avionics, the addition of gyro stabilisers or replacing paintwork. The caveat is that this must all be undertaken in the same calendar year as the purchase.

If the requirements are met and the purchase or lease is structured in the correct way, owners may be able to write off the entire purchase price of their newly purchased yacht against their trading profits.

In order to ensure that you can take advantage of the Section 179 Deduction, we recommend that legal advice is obtained before entering into any sales agreement. We also suggest that owners obtain a local tax opinion.

Join the discussion

To post comments please Sign in or Register

When commenting please follow our house rules

Click here to become part of The Superyacht Group community, and join us in our mission to make this industry accessible to all, and prosperous for the long-term. We are offering access to the superyacht industry’s most comprehensive and longstanding archive of business-critical information, as well as a comprehensive, real-time superyacht fleet database, for just £10 per month, because we are One Industry with One Mission. Sign up here .

Sign up to the SuperyachtNews Bulletin

Receive unrivalled market intelligence, weekly headlines and the most relevant and insightful journalism directly to your inbox.

Sign up to the SuperyachtNews Bulletin

The superyachtnews app.

Media Pack Request

Please select exactly what you would like to receive from us by ticking the boxes below:

SuperyachtNews.com

Register to comment

Buying a Yacht in Europe: Tax and Legal Considerations

We are often asked about applicable taxes in Europe for boat owners because there is a lot of confusion surrounding VAT Tax. While buying a yacht outside the US has benefits for some, it also has lots of complexities and nuances that you are probably less familiar with. So, if you are planning to buy a boat in Europe, make sure you understand the tax implications, especially if you plan to cruise in Europe for an extended period of time. Here we share information that will offer you guidance on the right questions to ask. Always employ a tax professional, legal counsel, and other assistance to ensure you are getting the correct guidance for your specific situation.

vat tax on a yacht in the european union

All EU residents who own a boat and use the boat within the EU are required to pay a 20 % Value Added Tax (VAT), which will hike up the sales price considerably. It’s important not to underestimate the complexity of VAT on vessels, especially for higher value yachts. As a matter of course when you check into an EU country or when you sell the boat, you will be required to provide evidence of VAT paid much like a Federal Duty paid certificate in the US.
For non-EU residents, the laws state that they are permitted to use privately owned yachts in the Mediterranean under “Temporary Admission” for up to 18 months without being liable to pay VAT. So if you want to cruise in the Mediterranean for a few months after taking possession, you can temporarily import the boat for up to 18 months.
If you are planning to transfer residence to the EU and it coincides with the permanent importation of the boat, you may be eligible for VAT relief.
After extended cruising outside the EU, a VAT paid boat exported from the EU may also qualify for relief on its return if it’s returned to the EU within three years of export. It must be imported by the person who exported it from the EU and cannot have significant upgrades that will increase its value substantially.
Boats that are kept outside the EU for more than three years may be required to pay VAT again so be careful about keeping good records.
A VAT paid boat could lose its VAT paid status if it’s sold outside the EU and VAT must then be paid if the boat is brought back into the EU, even if the buyer and seller are EU residents.
A European Union (EU) resident who buys a new boat or a used boat for personal use that did not have VAT paid will be responsible to pay the VAT rate applicable at the place of delivery as well as transfer tax or import duties. However, if the boat is acquired for commercial purposes or leased, the rules apply differently.
An off-shore registered yacht owned for commercial purposes in the Mediterranean is exempt from VAT, if the boat was imported into the Med per the applicable regulations.

It's All About Location

The location of the yacht, the residence of the buyer, and where the yacht will be operated as a business. Each aspect impacts not only taxes and duties at time of purchase, but also taxes related to collecting revenue. Some examples will help you better understand just how intricately entwined the location of the yacht, buyer, and business are:

Non-EU residents are permitted to use privately owned yachts in the Mediterranean under “Temporary Admission” for up to 18 months without being liable to pay VAT.

As you can see, to determine the appropriate legal and tax implications and rules you need to follow in your situation, it is vital to do deep due diligence to analyze the operational tax and flagging issues, cruising waters, nationality and residence of the vessel’s users, and any planned chartering operation.

*The information above is for general purposes only and should not be relied upon as a legal or tax advice.

Wanda Anglin

Join our community.

Get the latest on catamaran news, sailing events, buying and selling tips, community happenings, webinars & seminars, and much more!

1 thought on “Buying a Yacht in Europe: Tax and Legal Considerations”

Hi I am Swiss and looking to buy a used boat in the Schengen (EU) are. What are my VAT tax implications? Thank you.

Top 10 Reasons to Sell (and Sail) Your Catamaran in Annapolis, MD

We have a new home in Annapolis! The office is located in Annapolis, Maryland

Top 10 Reasons to Sell (and Sail) Your Catamaran in Texas

Our Texas Office is located in the Watergate Marina Center in Clear Lake Shores,

Annapolis Boat Show 2024

Meet with our team! Want to learn more about the Bali and Catana

Exploring the Catana OC 50 Catamaran: A Comprehensive Overview

The Catana OC 50 Catamaran, the latest addition to the Catana Ocean Class series,

For more than 30 years, we have been a part of the catamaran community and created Catamaran Guru™ to encourage and educate all the aspiring sailing out there. We understand the dream of traveling the world by catamaran and created a one-stop-shop to make that dream a reality for you.

Stephen & Estelle
Testimonials

Get Started

Yacht Sales
Used Yachts
Charter Management
Boat as Business Programs
Seminars & Events

Another sales-tax holiday kicks off Saturday across Florida

Hurricane season during tax-free holiday.

Central Florida residents are encouraged to prepare now ahead of what could be a busy hurricane season.

TALLAHASSEE, Fla. - A sales-tax "holiday" will start Saturday that can help Floridians prepare for storms as the state moves into the peak of hurricane season, while another set of tax breaks is on the horizon for people buying tools and other work gear.

The holiday periods, which will allow people to avoid paying sales taxes on purchases, are part of a tax package (HB 7073) that lawmakers and Gov. Ron DeSantis approved this year.

The first holiday period, which will begin Saturday and continue through Sept. 6, is designed to save money for people as they buy storm-related items ranging from packages of batteries and pet supplies to portable radios and generators. The state also held a similar tax holiday around the June 1 start of the six-month hurricane season.

Also, the state will hold what has been dubbed the "tool time" tax holiday from Sept. 1 through Sept. 7 to provide tax breaks on tools and work gear such as gloves, boots and ladders.

Hurricane seasons historically pick up in mid-August with the climatological peak around Sept. 10. Meteorological experts have forecast an above-average hurricane season this year, which could mean more than 20 named storms before the end of November.

So far, the season has produced five named storms, including Hurricane Debby, which made landfall near Steinhatchee on Aug. 5 as a Category 1 storm before dumping heavy rain across North Florida and parts of Georgia and the Carolinas.

Florida Emergency Management Director Kevin Guthrie this week advised people not to be fooled by the current calm in the Atlantic and to use the tax holiday that starts Saturday to "go out and restock or stock for disaster items."

"We're entering the peak weeks of hurricane season," Guthrie said Wednesday while in Sarasota. "They're upon us. Tropical cyclones may develop over the next four to six or even eight weeks."

The private meteorology company AccuWeather on Thursday predicted six to 10 named storms in September, citing factors such as water temperatures that remain near or at record highs across much of the Atlantic, Caribbean and Gulf of Mexico. Warm water helps fuel hurricanes.

"There’s a possibility that we could see multiple tropical storms and hurricanes in the Atlantic basin on the same day, similar to the frequency of storms that we’ve seen during other supercharged hurricane seasons like 2020," Alex DaSilva, AccuWeather lead hurricane expert, said in a prepared statement.

The tax holiday starting Saturday and the similar period around the start of hurricane season are projected to trim $80.2 million from state and local tax revenues. This year’s overall tax-cut package carries an estimated $439.6 million price tag.

Among other things, shoppers will not have to pay sales taxes on reusable ice packs that cost $20 or less; portable radios, fuel tanks and packages of batteries that cost $50 or less; coolers that cost $60 or less; tarps that cost $100 or less; and portable generators that cost $3,000 or less.

Also, tax exemptions apply to such things as wet dog or cat food that costs $10 or less; cat litter that costs $25 or less; pet beds that cost $40 or less; and over-the-counter pet medications, pet carriers and bags of dry dog or cat food that costs $100 or less.

During the "tool time" period in early September, sales-tax exemptions will be provided on work gloves that cost $25 or less and such things as hand tools, safety glasses, protective coveralls, shovels and rakes that cost $50 or less.

As other examples, tax exemptions will apply to hard hats that cost $100 or less; work boots that cost $175 or less; ladders that cost $250 or less; and power tools and vehicle tool boxes that cost $300 or less.

The tool time tax breaks are projected to save shoppers $19.8 million.

Who was Jonathan Bloomer? Morgan Stanley International chair dies in Italy's yacht tragedy

J onathan Bloomer, chairman of Morgan Stanley International and onetime chief executive of Prudential Plc, was confirmed as among the fatalities in the August 19 sinking of a luxury yacht off Italy. He was 70. His wife, Judy, was also among those killed. They had been guests on the superyacht Bayesian to mark the acquittal of British tech tycoon Mike Lynch at a trial in which Jonathan Bloomer had been a defense witness.