The Fractional Partner Program participant may be entitled to a number of very attractive tax benefits. To better understand the ultimate value to you of all of some of the following benefits and deductions, you may want to check your incremental tax rate here:
- Charitable donation of the yacht’s usage time: It is possible to donate usage time to a charitable organization that can use the time as a prize or to sell in a fund raising auction. The donation’s value can easily be determined from the market value of a comparable charter. This deduction could result in a tax reduction equivalent to up to 39% or more of the value of the donation (depending on the fractional partner’s incremental tax bracket).
- “Vacation home” type rental deductions: The fractional partner may choose to ask Florida Yacht Group to charter-out some of his/her fractional partner usage time. The taxation of charter fees earned and allowable deductions generally follows the IRS rules for rental of a vacation or second home. For example, if the fractional partner use the yacht for 8 weeks in a calendar year, and it is chartered-out by FYG for 12 weeks in that year, then 60% of the ownership expenses such as dockage and insurance and 100% of the FYG chartering fees maybe be deducted from the charter fees received by the fractional partner. This could effectively eliminate any income tax due on the charter fees received by the fractional partner.
- 2nd home mortgage Interest deductions: While, typically, it will not be possible to get a conventional loan from a bank to purchase the fractional partner share, all interest on a loan (granted by, for example, friends or family members) collateralized by the fractional share of the yacht should be deductible.
- Alternative tax-friendly loan interest deductions may be available:
- If the fractional partner determines that it makes sense for his/her situation to take a second mortgage on their personal residence and apply the proceeds to the purchase the fractional share of the yacht, that interest should be deductible.
- Similarly, the interest on a margin loan funds taken within an investment account is also deductible (subject to a 2% of AGI floor).
- Other business use of the yacht: To the extent that your other business activities (such as entertaining clients) can make use of your fractional share of the yacht, the value of that usage may be deductible.
IMPORTANT NOTE: FYG wants to stress to prospective clients that FYG is not a qualified tax adviser. Hence, the prospective owner is personally responsible for reviewing and confirming his/her entitlement to the foregoing tax benefits/deductions ideas with their personal CPA or tax adviser.
FWe strongly encourage all prospective Fractional Program participants to discuss the foregoing tax benefits and deduction opportunities for theri personal situations with their accountant or tax adviser. FYG is not a qualified to provide tax advice.