Bonus Depreciation and Yacht Ownership: The 2025 End-of-Year Advantage
If you’ve been thinking about buying a yacht, there’s never been a better time to understand bonus depreciation and how it can apply when your yacht is used as part of a legitimate business. Recent updates under the One Big Beautiful Bill Act (OBBBA) have restored 100 percent bonus depreciation starting in 2025, which can make a major difference for buyers who plan and act before year-end.
This article explains how bonus depreciation works for yacht owners, what qualifies as a business-use vessel, and how timing affects your ability to take advantage of this opportunity.
This is not tax or legal advice. My team of experts can help you navigate the process and connect you with qualified professionals.
What Is Bonus Depreciation?
Bonus depreciation is a federal tax incentive that allows a business to deduct a significant portion of the cost of certain assets in the first year they are placed into service. Under Section 168(k) of the Internal Revenue Code, qualifying assets with a recovery period of 20 years or less can be eligible for this deduction.
The goal is to encourage business investment by letting owners recover costs more quickly instead of spreading deductions over many years. For yacht buyers, that means a properly structured acquisition could create substantial tax savings in year one.
Why Yacht Buyers Should Pay Attention in 2025
The Tax Cuts and Jobs Act of 2017 originally allowed 100 percent bonus depreciation for qualified property purchased and placed in service through 2022. Without new legislation, that benefit would have dropped to 40 percent for property placed in service in 2025.
However, the One Big Beautiful Bill Act (OBBBA) passed in early 2025 reversed that phase-out. It reinstates full 100 percent bonus depreciation for qualified property acquired and placed in service after January 19, 2025.
That means a yacht placed into legitimate business service this year can potentially qualify for a full first-year write-off under federal tax law.
When a Yacht Qualifies for Bonus Depreciation
A yacht can be treated as business property if it is used primarily for income-producing purposes such as charter operations, corporate entertainment, or promotional activities tied to an established business.
The IRS applies strict standards for determining business versus personal use. In most cases, the yacht must meet these conditions:
Business use exceeds 50 percent of total use, supported by logs and records
Acquisition after January 19, 2025 under a binding contract
Placed into service in the same tax year—meaning the vessel is delivered, ready, and available for business use
Ownership by a business entity such as an LLC or corporation
Depreciable property under MACRS with a recovery period of 20 years or less
If the yacht is used mainly for personal pleasure or recreation, it will not qualify. IRS audits of “listed property” like yachts typically focus on documentation of business use, charter contracts, and income records.
The Importance of “Placed in Service” Before Year-End
The timing of when your yacht is placed into service determines which tax year the deduction applies to.
Placed into service means the yacht is ready and available for its intended business purpose—charter-ready, insured, and operational—not just purchased.
Simply signing a purchase contract or taking delivery does not automatically qualify; the yacht must be functional for its business purpose before December 31 if you want to claim the deduction for that tax year.
If placed into service after January 19 2025, it falls under the new 100 percent bonus depreciation rules.
In short: buying late in the year is fine, but make sure the yacht is delivered, equipped, and in business use before year-end to capture the deduction.
Examples of Bonus Depreciation in Action
Example 1: Business Charter at Year-End
A client purchases a 65-foot yacht for $2 million in August 2025. The vessel is registered under an LLC, delivered in November, and offered for charter in December. Because it was acquired and placed into business service after January 19 2025, the buyer can deduct up to 100 percent of the cost that year—potentially reducing taxable income by $2 million.
Example 2: Delayed Delivery
Another buyer signs a contract in December 2025, but delivery and charter readiness occur in February 2026. The placed-in-service date is 2026, so the deduction applies to that year’s return instead of 2025.
Example 3: Mixed Use
A yacht purchased for charter is later used mostly for personal trips. If business use falls below 50 percent, the IRS may require “recapture,” meaning part of the original deduction must be repaid.
Why Proper Structuring Matters
A legitimate business structure and accurate records are essential for defending any depreciation claim.
Before closing on a yacht purchase intended for bonus depreciation, make sure to:
Establish an operating entity (LLC or corporation)
Maintain a separate business bank account
Create written charter agreements
Track all business and personal use in detail
Retain delivery, registration, and insurance documents
Taxpayers may also consider combining Section 179 expensing with bonus depreciation, which allows additional flexibility in writing off business assets.
Key Risks and Limitations
If business use drops below 50 percent, depreciation may have to be recalculated under the Alternative Depreciation System (ADS).
Foreign-flagged or non-U.S. operations can complicate eligibility.
The IRS can disallow deductions if the yacht is not truly engaged in a trade or business.
Documentation must support acquisition and placed-in-service dates, charter activity, and entity ownership.
For high-value assets like yachts, IRS scrutiny is common, so strong documentation is non-negotiable.
What This Means for Buyers in 2025
The reinstatement of 100 percent bonus depreciation under the OBBBA has reopened one of the most powerful incentives in the U.S. tax code. For qualified buyers, placing a yacht into service before year-end can accelerate deductions that might otherwise take years to realize.
If you’ve been considering a purchase, 2025 is a year to act deliberately—plan early, structure properly, and coordinate with your CPA or tax attorney before closing.
Final Thoughts
Bonus depreciation can turn a strategic yacht purchase into a highly tax-efficient business investment—but only if executed correctly. The IRS rules are complex, and success depends on meeting business-use requirements, timing the placed-in-service date, and maintaining airtight documentation.
If you’re ready to explore this opportunity, I can connect you with experienced marine tax advisors who specialize in yacht ownership and charter structures. My role as your broker is to help you acquire the right yacht—and ensure it’s ready for service before year-end so you can capture every possible advantage.