Chartering your boat

Your CPA is talking about bareboating your yacht so it can carry more than 6 passengers. You'll need to present your charterer with a list of captains for them to choose from and your regular captain can't be on it. Quite frankly you don't sound like chartering type people. You don't sound like the type of owner who wants people holding parties on your boat, doing whatever in your beds or smoking whatever in your salon. You can charter to 6 passengers and use your captain, but how many people are going to lay out the kind of money involved just to day cruise with 6 on a 58 footer? Then there's the possible scrutiny from IRS.

I'm very skeptical of CPA's recommending such as I would be very afraid of them taking greater depreciation and expenses that reasonable and also the idea of contractors instead of employees gives rise to questions on my part.

First the finances of chartering and when it helps and how much and when it doesn't. If your usage is going to be far more than the charter usage, then at most it will offset a few expenses. The depreciation and other deductions would be minimal. However, the charter fees would give you some spending money and at least offset the higher insurance costs and docking costs.

If, however, you're going to use it very little and charter a lot, then chartering can eliminate a sizable portion of your expenses and make for sizable tax deductions.

This is much like chartering vs. buying. Whether you own and charter to others or whether you charter, chartering makes sense for those who use the boat very little but not so much for heavy users.

You think, I have a couple of months here. Well those months are the ones you need to do maintenance and to give crew time off. However, if you only use the boat two months of the year, it's far different.

All this is without the personal side. Boating is your recreation. Do you want to cloud your pleasure with business and create additional worries? The boat is your private sanctuary. Do you want to allow others you don't know to use it, to sleep in your beds or to lounge on your deck. Do you want nicks and scratches and spills that you know nothing about how they happened? Did you buy a boat to share? The only way I would ever consider it was with my crew that I knew and knew I could trust and was on my payroll.

I've said no to businesses having to do with boating so as not to mess up my pleasure with business. For those reasons, I say no to chartering. However, the only way I personally would ever charter would be when moving to a new boat, I might hire a crew and put the old in charter, but I don't really ever see myself doing that. I'm in the Boating Recreation and don't want to be in the Boating Business.

Exactly.

I had a friend that day chartered his sporty around Annapolis MD. Some of his rules included NO RED ANYTHING on the boat. Red wine, Red sauce, Red anything because of stains in the carpet & upholstery. Which he learned the hard way.

People unused to marine heads ? Newp.

Sea sickness in the head ? Newp again,

A CPA is looking at it strictly from the $ standpoint, no emotion attached.
I could not do that with my personal boat.

We spend so much time on ours it would not make sense anyhow but I'd never do it.

You've also got to be careful even with advice from CPA's. Major accounting firms have pushed tax shelters that were deemed by the IRS to be tax avoidance and all the clients ended up owing large amounts. I can easily picture a CPA building a little niche of boat owners who charter. Years ago it was owning horses so daughters could be in shows and claiming to be breeding, but IRS put in hobby rules. I can't speak of the CPA in question but I can tell you I've heard of CPA's on plane and boat chartering pushing things that I don't consider legitimate.

The big tax issue is over the allocation of expenses and depreciation to personal vs. business. Many long years ago after my father died I handled the audit of one of his former clients. Young agent in training tried to say his plane wasn't a valid business expense. I showed the logs, used for one trip during the year which was clearly a business trip. Used for three days. Agent then said it was stupid to own a plan for one trip a year. I said I agreed which was why he sold it later but expenses don't get denied because business owners are stupid.

A boat or plane being chartered is not likely to ever get you audited, but if you do get audited, I can guarantee it's something they will look at carefully and will question the calculations. So, make sure you've done it by the book.

I couldn't charter my boat. I understand it financially makes sense but it is just not worth it to me. If you had a Captain and didn't handle most maintance yourself and also had a mainly unemotional stance towards the boat then it could work for you.

And we love our crew too much to subject them to charter guests.

I'll bet you lay out the rules carefully to new charter guests as well. I would agree that weekly is far safer in terms of the type charter guests than daily is. We have friends who have gotten into rental homes and their minimum is a week. They don't want fraternities and sororities and similar just using it for a big party, same issue as boats.

Also, if you can get repeat customers, always best.

Surprised no one has mentioned CG rules and higher insurance costs if you charter.

I thought any boat being chartered had to satisfy a whole host of requirements that don't apply to boats not being used for charter. Also would have assumed insurance requirements and costs would differ.

From all I've read and all I've seen there are two scenarios:

1: Your boat, as OB said, is your sanctuary. Everything is just so, and you put a lot of money and even more love sweat and tears in to it. Close friends are allowed on board. I trust them to respect me and my quirky ways and treat the boat with utmost respect.

2: Your boat is a business. It's a spreadsheet, an asset. And it comes with said CPA. And crew. And if you're on it you have very little, if any, emotional attachment. You keep it looking and running so it does the business and the customers are happy.

I won't mix the two.

In thinking about my future boat, chartering was something I weighed for the oft-cited cost offset, but in the end, I don't think I could for reasons stated here. I would feel the same as I do about my home. I have more bedrooms than people who sleep in them, and people have asked me why I don't let out any of them and the reason is simple: My home is my castle, and I don't want strangers here. My boat would be my floating summer palace, and the feeling is the same. So for costs, I draw a final conclusion-- if I can't afford to operate it without chartering it when I don't use it, then I can't afford to buy it.