How and when yacht written off as business expense.

Not making suggestions... as only you know your situation... and don't know about a US based boat... or a single tax jurisdiction situation as your post seems to imply.
But one way is to establish the boat as its own business entity. Then charter for your company use... either under long term contract or as needed charter contract. As individuals need it they can charter it too at whatever rate they can negotiate... as can outside charters. The losses/profits of the boat business can then offset your profits/losses on other activities. While the charter use results in business deductions for the company or companies chartering the boat for business purposes. Often the boat company is in one tax jurisdiction and the charter customers are in another. Often the boat is often not fixed in location. You must be cognizant of situations wherein the boat is operated such that it is considered an import wherein it stays in a particular jurisdiction outside the jurisdiction of business entity too long... so you have to keep up on current law and regulations.

Speak to a good tax attorney and ideally a maritime attorney as well. There are legitimate ways to do it, which if or when audited, will be justified and will float through an audit. There are a lot of people who try this and get in some issues with it and pay for it later because they don't understand the law and how the IRS applies it. There are right ways to do it, and wrong. You'll pay dearly for doing it wrong.

A dollar of knowledgeable reference consultation now will be worth 1000's later.

Safe to assume this is a US flagged boat in US waters?

You buy a boat ... charter it ... and you can write off the costs of ownership and maintenance against the revenue you bring in with your charter business.

Now, if you owned a hotel, bar at the beach or travel related business, there might be an argument for that kind of business to own a boat and be able to write it off against the total revenue/profit of the business.

I'm no expert in this arena. However if the boat was owned by a seperate LLC, that was owned by the same owner or parent company. The losses of the boat LLC could be taken by the parent company, and you as an individual could charter the boat as much as you want.....for a cheap price.....which may only include price of fuel and this and that.

I think you are referring to Section 179... and if the equipment is used outside of the territorial waters of the United States... does not apply... and has a total limitation of $560K in 2012... if I remember... and for business purposes only. It is very simple. You do need a good tax advisor.

The ownership of yachts is not only tied to tax situations but to a host of other issues... liability is a biggy... maintenance... place to keep it... crew... as are a host of complex rules and regulations. The biggest is happiness.
Don't even go looking with any intent of buying without knowing not only the answers but the questions to ask... or you may not find happiness.
In some places you may buy the boat and find no where to keep it conveniently... on the French Riviera the berth is more important than the boat... so you got to have that sorted first. And, that might cost a good portion of what you might spend on the boat. Right now that is a little easier than usual. And, there is a season... which moves elsewhere... so the boat might have to move with it.
If you are a US citizen living in the US and using the boat in the territorial waters of the US, and it is not several million dollars with crew... don't complicate life is my advice. If it is a pleasure boat pay the taxes and your dues for what you can afford. Enjoy it.
If you want something bigger, meaning much more expensive, earn more money and worry about the rest when you do.
Boats are very expensive and complicated, if you want to enjoy more than you can afford to buy simply DON'T. Just take the money and charter when you have the bug... no fuss no muss... and ladies tend to appreciate this approach more. A good tax guy will help you determine if that use is business related and deductible or for pleasure only and not.
Company retreats can be good for business and taxes.
Don't pay unnecessary taxes but don't over reach either.
As to charter deal... lets say you have $550k to spend on the boat... total... well what about berthing, maintenance, fees, etc etc etc. You might not be able to afford the boat you buy. If you did a charter for a week and had a budget more or less $100,000: you will pay for the charter fee, fuel, docking fees, incidental fees, all costs basically and then a crew tip so you may be in the range of $125K for the week but it could be 3 couples... and you would have a very nice time... as a company retreat or some other legitimate expense... you'll be money ahead. A couple times a year might be nice. With fewer headaches. And, you can follow the season. There is a reason for it. Many do that and are happy.

Let us know what you learn ... there is a reason I didn't do it. I think that when it came down to the issue of really setting up the boat for charter with cleaning service, clean linens, advertising, crew, removing all my personal things from the boat, everything in perfect condition all the time, I realized it's not what I wanted.

Kind of like renting out a beach house ... I don't.

The Aviation Tax attorneys I have used briefly started offering their services for Yachts. They jumped out of the business as quickly as they got in. It's much more difficult with boats as there is no "legitimate" business purpose for the boat beyond charter.

Mike

25 + years doing tax deals.

My advice, Pay the tax.

Tax plays are only worth the risk where there is big money involved, you have solid tax advice from a real law firm, and you can afford to take on the tax authorities in court when challenged.

The US govt needs money, so loop holes will be closed and the IRS pushed to get its collections up.

The fact pattern is poor - Its a pleasure boat that will be used mosty for private use, with a veneer of Charter. You know that, the IRS knows that.

The tax adviser who says its ok will charge you to set it up, then have a field day when the IRS asks for its money back + penalties.

What does your commonsense tell you?

Are you still wondering why you have not seen tax firms advertising for this type of business?

I agree with the vixen! Reread my previous post seriously... That kind of money is not worth the bother...

My advice... use the money TO CHARTER a really nice charter in Med or Caribbean or someplace off the beaten path. Couple times a year before you think of buying. A 50-60' range is not worth a professional crew... it will sit in the marina gathering maintenance charges (and likely get neglected) become a money pit. You will not have the time to devote to it in all the work that has to be done... after all its a pleasure boat. Do you really want to be scrubbing, cleaning, waxing, trying to fix things in tight spaces, etc etc etc.

BUT the BIG RUB... is you will have to take it out and run it, know all the regs and rules... deal with all the marina crap trying to get a good berth... keep track of the weather... become expert sailors or risk your lives... and that is a biggy... have all the fights with family and friends over every little thing... while on the boat... using the boat... how does what and how does nothing... when some damages something... who pays and who hides out... etc etc etc. AND>>>and your wife would not like her share either... AND if your partners and you will fight and combined time on the boat with the ladies will become not so much fun.

IF you do the Charter route (where you buy nothing but HIRE THE CHARTER) your wives and families will like it better and you'll have some great memories. You'll experience a real get away... You'll actually get to relax. Your partners and you can vacation together and actually enjoy it.

And, importantly you'll learn what you like... watch the charter crew once in awhile... and think darn I'd have to be doing all that crap... !

A small popular song... a little sad which may become your theme song or as the French say "La goualante du pauvre Jean"... :

So image you finally have things going well a couple houses... a hundred million in the portfolio a place on the Riviera >>> and the boat bug comes back...
Some numbers on a boat of around 30 meters (100 feet) yeah bigger than your boat but not hugely....
$11,000,000.00 to purchase (new after a two year wait and lots of overruns... which are all your fault and you think that $8,000,000 slightly used deal looked too close to new to bother to put up with someone else's dream)... Berth over for 15 year lease $3,150,000.00... takes the broker six months to get one and your are told how very lucky you are [if you want one in Monaco... well you had better immigrate and be friends with the Prince... but they will still kick you out for events if it is any kind of choice spot and you don't get the six figure fee for the weekend]. You think you are good to go!
Then:
AT FIRST... you think oh... its a small operation Captain can manage it... and keep the books... to give to your accountant... until:
French tax authorities board after a year or two and determine you are not qualified for VAT exemption and handed a tax bill of $2,500,010.00 due immediately (They may not use your numbers even though you have receipts)... and them going back and look at fuel records... and getting tax bill on that too. Attorneys billings about $160,000.00 sorting it out but not much relief... getting the VAT and all sorted for $2,456,000.00 approx. (really what do you save).
Then you realize... oh, the boat deal is not like a car... and darn expensive for how much you use... .
So you hire professional boat management and it works but does add cost.
Your "little over a million operating a year guess... turns out to be Annual total costs of $1,745,173.00 and that is family light use... I am not going to break that down its endless... And, you realize your 30m boat packed in the berth with a bunch of others is a 20 million EXPENSE...
As you leave and enter the marina... you see the big boats... more a little down form you... and soon realize... you're a little puny guy nothing in the real world... and mutter... NOM DE DIEU... c'est un PUTAIN DE MERDE... and in French that is not profane!

So you dream of the peasant cottage in the hills of Provence to share with a cute charming stupid little peasant girl and a row boat down on the pond... !

But they do grow up!

"They do grow up"

Both the girl and the boat dreams...