New Federal Tax Law Restores 100% Bonus Depreciation for Charter Yachts
Federal Tax Change Boosts Incentives for Charter Yacht Operations in the USVI
Now may be one of the most advantageous times in recent years to operate a charter yacht in the U.S. Virgin Islands.
A federal tax change enacted on July 4, 2025, under the One Big Beautiful Bill Act of 2025, restores 100% bonus depreciation for qualifying business property — including yachts used primarily for legitimate commercial purposes. The provision allows eligible owners to deduct the full purchase price of a qualifying vessel in the first year it is placed into service.
To qualify, the yacht must be used more than 50% of the time for business activities, such as charter operations, corporate events, or client-related functions. The vessel must also operate primarily in U.S. waters, which include Puerto Rico and the U.S. Virgin Islands.
The restored bonus depreciation applies to yachts acquired and placed into service between January 19, 2025, and December 31, 2029.
Expanded Section 179 Expensing
In addition to restoring full bonus depreciation, the legislation increases Section 179 expensing limits, allowing certain business owners to combine deductions and potentially claim larger first-year write-offs.
However, the opportunity comes with strict compliance requirements. The Internal Revenue Service mandates:
Demonstrable commercial intent
Active charter operations
Detailed operational and financial documentation
Proper structuring to avoid depreciation recapture
Failure to meet these standards could result in tax consequences if the vessel later falls below required business-use thresholds.
Potential Market Impact
Industry observers expect the change to influence both new yacht purchases and charter market growth over the next several years, particularly in U.S. territories such as the USVI, where vessels can meet the domestic-use requirement while operating in desirable cruising grounds.
As always, yacht owners should consult qualified maritime tax professionals before making purchase or structuring decisions.
For legislative details, visit congress.gov.
The post New Federal Tax Law Restores 100% Bonus Depreciation for Charter Yachts appeared first on ALL AT SEA.