The Lease Purchase 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:
- 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.
- “Vacation home” type rental deductions: The lessee 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 lessee, 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, then 50% of any ownership expenses not fully paid by FYG and 100% of the applicable FYG chartering fees maybe be deducted from the total charter fees received by the owner in this program. This could effectively eliminate any income tax due on these fees received by the lessee.
- 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 lessee’s incremental tax bracket).
- Alternative tax-friendly loan interest deductions may be available:
- If the prospective lessee determines that it makes sense for his/her situation to take a second mortgage on their personal residence and apply the proceeds towards the lease payment, 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).
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.