4 Things To Know Before Donating Your Yacht
What To Know When Donating Your Yacht
Donating a Yacht Ceases Costs - If you donate your yacht to a qualified 501(c)(3) charitable organization, as soon as you have an appraisal done and are provided with a major gift receipt from the organization, you’re no longer on the hook to pay operating costs. Crew costs, dockage, insurance, maitenance, etc.
Appraisals Are Friendly - Often times yacht owners can become disgusted and disappointed when they find out that the offers they’ve received or the lack of offers they’ve received, are far below what they believe their vessel is worth. A surveyor or appraiser for a donated vessel is known to be a bit friendlier than a appraiser during a traditional sale.
Individual vs Corporation - While owning a yacht under a legal structure such as a corporation or LLC provides numerous benefits, it may become a detriment if you one day decide to donate your yacht, for the simple fact that your deduction will match the appraised value so long as that doesn’t exceed 50% of your taxable income if your an individual owner or 10% of taxable income as a company owned yacht. The problem here is that yachts owned by companies don’t typically have any positive net income to offset, since at the end of the day, a yacht is a depreciating asset.
Taxable Income Deduction - Building on the point above, let’s use the following example.
Your Annual Income = $10,000,000
Your Vessels Appraised Value = $1,000,000
Market Offer (25% Below List) = $750,000
Annual Operating Costs = $100,000
Tax Rate = 40%
$10M (Taxable Income) * 40% (Tax Rate) - $100K (Op Costs) - $250K (Vessel Loss of Value) = $5,650,000
$10M (Taxable Income) - $1M (Vessel Value) = $9M (New Taxable Income) - *40% (Tax Rate) = $5,400,000
The question: Does unloading the vessel to begin a search for what you really want and the opportunity to do something well outweigh the $250k difference? The answer more often than not is yes.
Assure the Charity has an Interving Use - Charities can either use the yacht for funraising, education or research or charities can sell the yacht through liquidation or at auction on your behalf. What does this mean? If they use the yacht you’ll obtain the tax benefit in full but if they sell the yacht, you’ll only be able to claim what they sell it for as your deduction.
If you want to find out specifically how you can go about donating your yacht, to whom, how you can optimize your benefits, I would love the opportunity to walk you through the process.
Feel free to reach out to me at cm@theyachthunter.com or at (305) 709 - 2644.