Here's the relative information in brief:

• Increases the Code Sec. 179 $128,000 expensing limit to $250,000 and boosts the overall investment limit from $510,000 to $800,000, for tax years beginning in 2008.
• Permits a bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property acquired and placed in service after Dec. 31, 2007, and before Jan. 1, 2009. The otherwise applicable "luxury auto" cap on first year depreciation increases by $8,000 for vehicles that qualify. 

For the summary of the joint committee, go here. SEE THE ACTUAL TERMS HERE--SUMMARIZED BY JOINT COMMITTEE

How do you get the tax advantages?

Typically, you set up a LLC or other pass through entity and the tax advantages directly offset taxable income from any source, including your regular job. With our business plan, you will know pretty precisely what the tax advantages will be, so you can adjust your with holding and use the tax advantages to offset cash flow immediately! You do not wait until the end of the year (even IRS will tell you this!)

 

So, what does all of this mean for those wanting to set their boat up as a business in our Boat-As-A-Business program?

If you would like more general information on our Boat-As-A-Business Plan, and haven't seen the basics yet Go here.

First of all, perhaps nothing!

Uncle Sam has always supported small business. He literally wants you to have a boat! In fact, if you're probably already paying for a boat--you just don't have it. You're paying taxes to the IRS that could be building equity in a new boat! The tax rules as they exist now, are incredibly helpful. Take a look...

The way the tax rules were written and in effect prior to 1/1/08, if you followed our guidelines and set your boat up as a business you could:

1. qualify for MACRS (10 year double declining depreciation), and...
2. expense up to $128,000 of your boat investment the first year
3. Write off all or a significant share of your expenses.

These tax deductions, combined with the potential income available, could cover 80-100% of your boats cost with under 50 days of charter. With available financing and available rebates, your downpayment could be 0-10%, and your cash flow $0!

How might these new tax laws help you?

If, for any reason, you need a huge tax deduction that can offset income from other sources... For example:
1. You are at the top end of the tax table.
2. You have, or are anticipating a big increase in income this year.
3. You have a huge capital gain from real estate, stock options, or whatever--these deductions can offset that tax liability.

Imagine, you can write off up to $250,000 as an expense allowance--as long as the boat costs more than that. And/or, you can depreciate 50% of the boat this year. What could this mean just this year?

You purchase a $500,000 boat (and have a marginal tax bracket that would justify a large write off--25% or greater-combined federal/State):
You could get the $250,000 179 deduction
You could get bonus depreciation on the resulting basis or another $125,000
You then get the first years depreciation (based on the half year convention, MACRS) 10% of the basis from above--another $12,500.
In other words, a total deduction this year of $387,500--THIS YEAR!
But, as I said, you can take any portion you need of all of this. We can show you exactly how it would work, based on your situation. Want to know more?

Putting it together...

When you set your boat up as a business you get income and tax advantages. How much in tax advantages?

From a tax point of view, there are two aspects. Advantages the  first year (when you put your boat into  service) and the longer term benefits. The first year you can qualify for the 179 expense allowance of up to $250,000 and depreciate 50% of your boat. See example above.

The new tax stimulus program offers tremendous benefits and tremendous flexibility.

The first step is to calculate or find your "marginal tax rate". Once you do that, you can figure out what your marginal rate will be for the tax benefits to follow, and thus what your tax savings will be.

Tax Calculator

Figure your tax bracket!  Click here. Find your marginal rate now, and then apply as much of the  tax advantage as you like to watch your marginal rate reduce and the effect on reducing your tax liability. For example, say you have $400,000 in income with $100,000 in deductions currently--make the calculation, and then increase your deductions $100,000, $200,000 or more. You can print your results and they will look something like this:
Now you can qualify for writing off 50% of your boat, plus qualify for the 179 expense allowance of up to $250,000. Use as much as you need, and then use the rest of the tax advantages over subsequent years.

Get the complete information here.

If you want a more detailed business plan and a complete explanation of the tax advantages and how to qualify for them--this includes information that your tax advisor may need to better understand how this program might work for you.

Our Tax Planning Guide will include:
1. How to qualify for active tax advantages.
2. What's different with this approach and a charter company plan.
3. The two keys to qualifying--this will make your tax advisor say, Ahhh...
4. The information your tax advisor needs to understand whether this program might work for you.

5.How to avoid an audit.
6. Record keeping requirements.
7. The IRS tests.

Bonus links will:
A. Explain in detail how the plan works.
B. How your business will operate
C. How the management company interfaces with you.

To get access to our confidential information and a custom business plan-please, please go to our web page, fill out our finance application and  fill out our form. You will receive a detailed business plan with month by month, and year by year tax advantages, cash flows and more. Find out exactly what the benefits are to you.

NOTE: If you do not wish to fill out the finance application yet, we'll still provide a comprehensive, summary business plan that should help you determine if you want to go further.

If you have any questions, please call.
 

Maybe, maybe not.

Ultimately, it is wise to talk to your tax advisor to optimize your situation.

However, the decision itself, in the end, is yours. Your tax advisor is busy and may not fully understand this program. Right now, (s)he probably doesn't have time to figure it out.

We've found that about 50% of tax advisors will say no to the idea without fully understanding why this approach works. (The other 50% enthusiastically endorse the idea--if you can't find the right advisor, we can refer you to one.) Keep in mind, we've already helped over 650 people set their boat up as a business--successfully.

Far from encouraging an audit, when you follow our guidelines, you are very unlikely to be audited--however, if you are, as 3 others have been, you will have the tools and knowledge to get through it simply and easily. Not one of the people who followed our guidelines lost a single dollar of tax deduction claimed!

The disadvantages of delaying a decision...

Timing is everything!
If you can get a boat for spring, that's ideal (ask us what's available). You can qualify for a full years of tax advantages and get income to cover cash flow the year you place the boat in service.
There are other scenarios that work, including getting a boat in the fall and having it go directly to the Islands.

Talk to us to better understand how to optimize your situation. But, if your tax advisor isn't ready to talk right now--don't delay. Keep moving forward and let him catch up later. The most important thing is that you get and understand the information that we can provide. 410-263-2311

Get the information that you need...

If you would like more general information on our Boat-As-A-Business Plan, and haven't seen the basics yet Go here.
If you want a summary business plan --please fill out this form here.
To get access to our confidential information and a custom business plan-please, please go to our web page, fill out our finance application and  fill out our form.

In Annapolis since 1972, still owned and operated by the founder, Eric Smith. We're located on the harbor, in the U.S. cruising capital, Annapolis. We have helped 1,000's of owners customize their boat to meet their specific requirements. We offer full yard and commissioning services, Sailing courses and charters, financing, insurance and complete services in every category.

 

Visit our capable and knowledgeable professionals at our office On the Harbor, 2nd and Spa Creek (next to the Chart House Restaurant, in the Yacht Haven Marina.) Email: info@bayacht.com Phone 410-263-2311.

HOURS: Mon-Fri.: 9:00 to 5:00 Sat.: 10:00-4:00 Other times by appointment.

To meet us any time, including outside of the hours shown, please give us a call at our office anytime: 410-263-2311