The Guaranteed Income 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:
- Loan interest deductions: Typically, an owner in the Guaranteed Income Program will take a loan at the time of purchase that is collateralized by the the yacht. Most of the loan interest paid should be deductible from the Guaranteed Income Program payments made to the owner by FYG, as well as, any other income received for the use of the yacht. This could effectively eliminate any income tax due on the fees and payments received by the owner.
- Expenses to manage the yacht provided by the owner: If the owner incurs expenses to attend meetings directly related to his participation in the the Guaranteed Income Program or to resolve other matters related to the yacht’s usability in the program, those costs should be deductible from the Guaranteed Income Program payments and any other fees earned by the yacht’s usage.
- “Vacation home” type rental deductions: The owner may choose to ask Florida Yacht Group to charter-out some of his/her unused personal 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 owner who is entitled to use the yacht for 12 weeks per year, only makes use of 4 weeks in a calendar year, has it is chartered-out by FYG for 4 weeks in that year in addition to FYG’s 40 weeks, then 91%% (i.e 44/48ths) of the ownership expenses not fully paid by FYG (such a loan interest) and 100% of the applicable FYG chartering fees maybe be deducted from the total fees plus GI payments received by the owner in this program. As mentioned, this could effectively eliminate any income tax due on the fees and payments received by the owner.
- Charitable donation of the yacht’s usage time: It is possible to donate some of your personal 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).
- Alternative tax-friendly loan interest deductions may be available:
- If the Guaranteed Income owner 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 personal usage time, 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.