Full Depreciation on Charter Yachts: What Yacht Owners Need to Know in 2025

With the signing of new tax legislation in July 2025, yacht owners interested in charter operations now have a powerful incentive to act. The recently passed “One Big Beautiful Bill” (OBBBA) restores 100% bonus depreciation for qualifying business assets—including charter yachts—providing a major financial advantage to those who put their vessels into commercial service this year.

Whether you’re a seasoned owner considering offsetting ownership costs or a buyer exploring a yacht purchase with charter potential, this update creates compelling tax opportunities. Here’s what you need to know.

Understanding 100% Bonus Depreciation and Section 179 in 2025

The restored bonus depreciation provision allows yacht owners to write off the full purchase price of a charter vessel in the first year it is placed in service. Previously scheduled to phase out, 100% depreciation is now back in place—retroactively effective from January 20, 2025.

Additionally, the Section 179 deduction has been expanded:

• Maximum deduction: $2.5 million
• Phase-out cap: $4 million, indexed annually for inflation

Combined, these provisions enable full depreciation of qualifying yachts, even those with multimillion-dollar price tags, offering significant tax deferral or savings in year one.

Who Qualifies—and What the IRS Requires

To take advantage of this legislation, certain criteria must be met. The most important include:

• Business Use Threshold: The yacht must be used more than 50% for business purposes, such as documented charter activity.
• Proper Ownership: The vessel should be owned through a qualified business entity, such as an LLC or S-Corp.
• Placed in Service Deadline: The yacht must be operational in a charter capacity by December 31, 2025.

It’s also critical to maintain:

• Accurate usage logs
• Charter agreements
• Proof of marketing and operating expenses
• Documentation of limited personal use

Because luxury asset deductions can trigger IRS scrutiny, working with a CPA familiar with yacht operations is essential.

A Practical Example: How the Numbers Work

Let’s say you purchase a yacht for $2,000,000 in August 2025 and place it into a charter program before year-end. Here’s how depreciation could work:

• Section 179 Deduction: You apply the maximum $2.5 million deduction (easily covering the full cost).
• Bonus Depreciation: If your taxable income or Section 179 limit doesn’t cover the entire basis, 100% bonus depreciation applies to the remaining amount.

In effect, you can write off 100% of the purchase price in the same tax year—potentially saving hundreds of thousands of dollars in taxes, depending on your income bracket.

Now Is the Time to Act

This legislation makes 2025 an opportune year for yacht owners to explore chartering as a strategic financial move. If you’re considering adding your vessel to a charter program or purchasing a yacht with charter potential, the ability to fully depreciate your investment in the first year can significantly enhance your return.

📅 Remember: Your yacht must be placed in charter service by December 31, 2025 to qualify for the 100% depreciation benefit.

Ready to Learn More?

If you’re ready to explore how chartering can offset your yacht ownership costs—or if you’re considering a purchase designed with charter in mind—reach out to Paul Denton of Denison Yachting. With deep industry knowledge and experience helping clients navigate ownership and chartering strategies, Paul is your go-to resource for maximizing both enjoyment and value from your yacht.

👉 Contact Paul Denton today to discuss your goals and chart the best course forward.