Donate Your Boat- A Socially Conscious Investment

Reviewed: August 19, 2014
By FinanceWeb

Donating A Boat To Help Those In Need

Charities play an important role in America, and they face difficult demands in times of high unemployment and declining economic conditions. When overall levels of charitable giving tend to decrease, prevailing economic conditions can pose great challenges for charities. Their efforts to raise monies to help needy people in the U.S. and abroad depend upon generosity. Particularly in difficult economic periods, donations of property such as cars and boats can provide mutual benefits for the donors and charities. Wealthy donors or simply those with taxable income can help others while taking a tax deduction of the fair market value of the donation.

Benefits Of Donating A Boat

There are many kinds of watercraft including yachts, sailboats, jet skis, and sports boats. There are many reasons to donate watercraft, for some it is a relief to shed the costs, responsibilities, and time commitments associated with boat ownership. For others, the benefits of donating involve avoiding the time and effort required to sell a boat. There have been periods when the market for boats has been poor. Market conditions can make a sale difficult, and the tax benefits for charitable donations can have the same net-effect as cash proceeds from a sale. A full service charitable organization will simplify the donor’s role. The charity’s services include pickup and transportation, an initial receipt for the property, and a second receipt for the actual sales price.

Finding The Right Charity

There are more than a million section 501 (c)(3)charities filing with the IRS each year. In order to confer a tax deduction, the charity must have a Section 501(c)(3) certification. A major task in donating a boat is to find a charity that accepts boats and has demonstrated the ability to sell boats. Further, donors may wish to know far more than these basic qualifications such as the organization’s purposes, its active projects or activities, and its record of charitable achievements. Many charities absorb a high percentage of donated value for administration and leave a smaller than desired percentage of value to the ultimate recipients. One way to locate a list of suitable candidates is to use reference services such as the Better Business Bureau or an organization that specializes in locating and assessing charities for donors. There are many organizations that match donors and charities, one organization is the Charity Navigator, which offers a nationwide network of IRS certified charities and details about their respective programs and operations.

Valuation

Donors are entitled to a deduction no greater than the fair market value of the property. One can establish the fair market value of the property in a number of ways including appraisals by experts, reference to industry standard publications, and recent sales of comparable items. The difficulty with each of these methods is the potential to overstate the deduction and the risk that IRS would review the filings and reduce the value. The IRS ruled that the value as determined by the actual resale amount is a far stronger position. There is a presumption that the actual sale value is fair market value. Determining the fair market value of the property is essential to claiming a tax deduction for the donation.

Paperwork, Valuation and Deductions

Among the helpful tips for donating a boat to charity is to clearly state the property, its condition, and all included equipment and accessories. The donor must transfer title of the property to the charity. Lacking a title, the charity will indicate its preferred method of proving ownership and the power to dispose of the property. Charities experienced in handling boat transactions provide appraisals if needed, and assistance with paperwork including a signed 8283 IRS tax form for property valued in excess of $5,000.00.

Sources:

IRS Publication on Charitable Donations
http://www.irs.gov/uac/Publication-526,-Charitable-Contributions-1

Charity Rating Service
http://www.charitynavigator.org/

More than One Million Charities
http://foundationcenter.org/getstarted/faqs/html/howmany.html