The wealthiest individuals in the United States are waiting until after the presidential election to make big-ticket purchases such as jets and yachts in the hopes of saving millions on taxes, particularly if Donald Trump is re-elected. Individuals who are looking to deduct the cost of these purchases as a business expense are considering waiting until a more favorable tax scheme is in place. Trump has indicated to a group of billionaires that restoring the 2017 Tax Cuts and Jobs Act, which included the ability to 100% depreciate the cost of a jet or yacht used for business expenses, is a priority for him.
The amount that can be deducted from a tax bill for capital investments like jets and yachts has decreased from 80% last year to 60% this year, with a further drop to 40% in 2025, 20% in 2026, and 0% in 2027 unless the tax cuts are restored. The impending election has led to uncertainty within the yacht and private jet industries, with potential buyers waiting to see what changes may occur in taxes after the election. The demand for jets and yachts seems to be slowing down, particularly in the pre-owned market, where there is currently more supply than demand.
The prices of jets and yachts suggest that demand is decreasing, with fewer jets being sold between October 2023 and March 2024 compared to the previous year. While the largest yachts remain in demand, the market for slightly cheaper boats in the $40 to $65 million range is softening. Business clients in the jet space are more sensitive to tax implications like depreciation rates, opting to wait for a more favorable tax scheme before making a purchase. The potential for significant tax savings may be prompting these individuals to hold off on buying until after the election.
The IRS announced an increase in audits of jet owners earlier this year, adding another factor that may be discouraging potential buyers from making immediate purchases. Buyers are advised to proceed cautiously and ensure they are not engaging in any illegal activities that could lead to consequences during an audit. Despite potential audit concerns, the bi-coastal source mentioned earlier plans to move forward with buying a yacht and a jet, emphasizing the value of having a yacht to entertain clients and discuss business in a captive environment where distractions are minimized. It remains to be seen how the outcome of the presidential election will impact the decisions of wealthy individuals in relation to these big-ticket purchases and their tax implications.
