How to Donate Your Boat to Charity for a Tax Deduction
Donating to charity is a great way to help out those in need. Charities are created for the purpose of raising awareness about a specific cause, giving people a chance to donate their time, money, and property in order to help those affected.
There are hundreds of charities people can donate to, including charities promoting awareness about specific diseases, awareness about people affected by natural disasters, awareness about those in poverty, etc. Because all charities are non-profits, many rely upon donations to fund their charities.
Donations are typically tax deductible, which can help you out financially. In essence, while you are helping others out, you are also protecting your finances. If you have a boat you are interested in donating for charity, here are the necessary steps to take to make sure you get a tax deduction:
When it comes to donating a boat, in order to receive a tax deduction, the charity must be a government recognized charitable organization. While you can donate directly to a charity, there are specific charitable boat organizations that will do the process for you, which can make the donation much easier, as they will transport the boat for you, transfer the vessels name for you, and can provide you with the necessary paperwork to get started on your tax deduction.
2. Boat Appraisal
When it comes to boat donations, it is important the boat is appraised for market value, as you will need to include the appraisal in your tax forms. Because there are certain stipulations to boat auctions and other types of sales, having it appraised can help you determine the best way to donate your boat. In most cases, if the boat is most likely worth more than $5,000, it is a wise idea to have a reputable boat appraiser come out and estimate the value. If the boat is most likely less than $5,000, NADA guides can be a great, simple way to find out the market value.
3. Auction Sales Over $500
When it comes to boat donations, more often than not, the boat will be auctioned off for charity. Auctions are used not only to raise money for the charity, but also to raise awareness for the charity. If your boat is being auctioned off, you can only deduct the amount the charity made off of the boat sale. For instance, even if your boat is worth $8,000, if the charity only receives $5,000 for it at the auction, you can only deduct $5,000 on your tax forms. On the other hand, if a charity sells the boat above the value of your boat, you are still eligible to deduct that amount off your forms.
4. Auction Sales Under $500
There are special rules to boat sales under $500. If your boat were to sell for under $500, you can deduct either the smaller market value price or $500. Thus, if the boat was worth $900, but only sold for $400, you can deduct $500 from your tax returns since $500 is the smaller of the market value. But, if the boat was only worth $300, and it sold for only $200, you could only deduct the $300, because the market value is less than $500.
5. Market Value
However, if the charity uses the boat for its own mission or purpose, then you can deduct the boat’s market value on your tax forms. If a charity used your donated boat for a water safety demonstration, for example, you would be able to deduct the market value of your boat on your income tax returns.
Moreover, if a charity gives the boat to a person in need, or sells it to them way below market value, you could deduct the market value from your forms.
6. Tax Form
Once the boat has been donated, you should receive a Form 1098-C, which will tell you how much the charity sold the boat for. When it comes time to file your taxes, you need to include your tax forms, claim the donation, and include your formal appraisal.
These steps can help you donate your boat successfully while also meeting the income tax requirements.
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