The Tax Cuts and Jobs Act of 2017 increased the bonus depreciation percentage from 50% to 100% for eligible property purchased after September 17, 2017, but before January 1, 2023. Purchases made after January 1, 2023, may be eligible to receive a bonus depreciation percentage of 80%, and subsequently will ramp down to 60% in 2024, 40% in 2025, 20% in 2026, and 0% beginning in 20274.
Bonus depreciation can be combined with Section 179 to maximize your tax savings. For example, if you buy a yacht for $2 million and use it for business purposes 60% of the time, you can deduct $1.2 million under Section 179, and then deduct another $800,000 under bonus depreciation, resulting in a total deduction of $2 million in the year of purchase2.
Charitable Donations: A Deduction for Giving Away Your Yacht
If you want to get rid of your yacht and support a good cause at the same time, you may consider donating it to a qualified charity. By doing so, you can claim a tax deduction for the fair market value of your yacht, as long as you meet certain conditions.
First, you need to donate your yacht to a charity that is recognized by the IRS as a 501©(3) organization. You also need to obtain a written acknowledgment from the charity that includes the name of the organization, the date and location of the donation, a description of the yacht, and a statement of whether you received any goods or services in exchange for the donation.
Second, you need to determine the fair market value of your yacht. This is the price that a willing buyer and a willing seller would agree on in an arm’s length transaction. You can use various sources to estimate the value, such as sales listings, appraisals, or guides. However, you need to make sure that the value is realistic and supported by evidence.
Third, you need to report the donation on your tax return. If the value of your yacht is more than $500, you need to file Form 8283, Noncash Charitable Contributions, and attach it to your return. If the value is more than $5,000, you also need to obtain a qualified appraisal and attach a copy of it to your return. If the value is more than $500,000, you need to include the appraisal with your return.
