Bonus Depreciation for Yachts: Your 2025–2026 Strategy Guide
A Mangusta Gransport has the scale to make bonus depreciation a lucrative strategy, but day boats work just fine too.
It’s that time of year: bonus depreciation is back and here’s your guide to seeing if your next yacht purchase qualifies.
Bonus Depreciation Reestablished
Congress recently restored 100% bonus depreciation for certain business property, including vessels used in legitimate commercial operations. Thanks to the “Big Beautiful Bill”, this provision once again allows yacht buyers to write off the entire purchase price of qualifying vessels in the year they are placed in service. For buyers considering a yacht for charter or other commercial use, the timing is highly favorable.
What Changed in 2025
Originally enacted under the 2017 Tax Cuts and Jobs Act, 100% bonus depreciation was set to phase down after 2022. By 2025, it had dropped to 40% for most property. The new law overrides that schedule and restores full, immediate expensing (100%) for qualified property acquired and placed in service on or after January 19, 2025.
Yacht buyers who establish genuine commercial operations can deduct the full cost in year one, rather than depreciating over a longer schedule.
The 50% Business Use Requirement
The biggest hurdle to qualify for 100% depreciation is the predominant use test. Property (including boats) must be used more than 50% for qualified business purposes each year to qualify for bonus depreciation or Section 179 expensing. While focusing on the split of business vs. personal use, also understand how the IRS qualifies each of these designations.
Qualified business use: bona fide charter operations, client charters, or other income-producing activities.
Personal use: private outings with family or friends, which do not generate income.
Documentation is critical. The IRS requires active logs be kept (they specifically say the logs should be “contemporaneous”), charter agreements, marketing records, and financials to prove that business use exceeds 50%. All the documentation is not difficult as long as you utilize bonus depreciation for the right reasons, which, with the right selection of vessel, is easy.
Can You Still Use It Personally?
Yes. The rule does not demand 100% business use. You may use the yacht for personal enjoyment when not in charter, so long as documented business use exceeds 50% annually. But even if your documentation shows 51/49, you’re walking a thin line.
Depreciation Recapture on Sale
Bonus depreciation, regardless of the asset type, is best utilized in the long term. If you fully depreciate a yacht and then sell it shortly after, the IRS claws back the tax benefit and the proceeds of the sale are treated as income:
Example: Buy a yacht for $1,000,000 in 2025, claim 100% bonus depreciation. Basis = $0.
Sell in 2026 for $700,000 → the entire $700,000 is ordinary income in 2026.
If you’re thinking bonus depreciation, utilize the tax break to generate income over a 3-5 year period, where you produce more net income charter income than the total of the proceeds from the yacht when you sell.
What Legitimate Commercial Operation Looks Like
For the IRS to respect your deductions, the operation must be a real business, not a hobby. Indicators include:
Professional marketing and advertising (listed for sale online via your website or 3rd party sites)
Licensed & full time crew (a charter boat run by part-time crew is questionable)
Business licensing and insurance (commercial vessel insurance vs. recreational)
Profit & loss statements (standard business records)
Ability to demonstrate interest in growth and success (tough for the IRS to make claims against your intention while you’re expanding your business)
Simple Takeaways
100% bonus depreciation is back for yachts acquired and placed in service after January 19, 2025
You must prove >50% of qualified business use each year, while keeping detailed records
Keep a long-term strategy to best utilize the financial benefits
Treat the yacht as a serious commercial venture with real operations, or risk IRS questions
Reed’s Bonus Depreciation Playbook
Step 1: Analyze your market, choose your boat, and buy it well
Step 2: Structure it correctly, insure it properly and staff it accordingly
Step 3: Build a business plan to generate charter revenue during >50% of your vessel’s activities
Step 4: Track all vessel activities and transactions via your crew and CPA
Step 5: Enjoy your vessel when appropriate and enjoy the tax savings of your purchase
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About the Author
Reed Nicol is a licensed yacht broker with experience in all corners of the marine industry. He’s worked as an executive and sales director in yacht manufacturing and distribution, has structured commercial charter operations, and designed and executed notable refits. Read more about Reed’s marine journey, his love of helping 1st time boaters and his entrepreneurial spirit here.
Reed Nicol [Licensed FL Yacht Broker #11926]
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