It is humanitarian effort to work for charity as it gives you an opportunity to support a cause and will in turn help you feel satiated having helped those in need. If you own a boat and are certain you wouldn’t need, it will benefit you and the charitable organizations alike if you donated the asset. While the charity can use the boat for their activities, you can benefit from the tax exemptions. The more activity that the boat clocks on the log, the better it gets for you. But, nevertheless, you mustn’t engage in charity greedily expecting benefits. Charity work must be done as a support for the cause.
Thanks to the recent upgrades in the IRS tax laws that governs all the charitable donations, the vessel donations have somewhat become twisted. The donations itself as a standalone discussion is poorly understood by the donors. The twist soon became knot due to the slack in the economy and the impact of which came heavy on the boating market. So, if you are still asking if you must donate a boat? The answer is “maybe”.
It may appear graceful to help another by gifting your old boat. Worse, you could turn a helping opportunity into a financial burden if you are unprepared for the process prior to donation. So, make sure you do some groundwork before you decide to choose the organization to give away your old boat. Having clarity about the organization is important before you choose the charity. Ensure they are qualified before to conduct a charitable cause. Check the IRS Publication 78 to get reliable answers with regards to the organization you are planning to donate your old boat.
If you are aiming for a fat deduction from IRS, you will have to make the claim for “fair market value” of your vessel. The best way to make an assessment is to get an appraisal from an appraiser or a certified marine surveyor. It is evaluated precisely by drawing a comparison with identical vessel types. When the surveyor is evaluating, you must mandatorily inform all the upgrades and replacements you have retrofitted on your boat. If you have installed any item of value, then you can expect higher than normal returns. An appraisal is mandatory for those boats that cost greater than $5,000. If you are expecting to claim a fair market value, IRS will mandate your boat to be used for “significant intervening purpose” for conducting the charity’s activities regularly.
If the vessel is found to be used for charity’s activities, the boat will be an asset liquidated by the charity less than three years of donation. There is a greater chance the IRS may limit the donor’s deduction to the earnings the charity raked from the boat. But, if the price for liquidation of the donor’s asset (boat) is less than the fair market claim, it may pose problem to the donor as the IRS may not allow the original amount to be deducted. To avoid the hassle of long term maintenance and the insurance that could go north, many charities liquidates motorized assets.
If you are scouring for a right charity for donating your boat, you must ensure that the charity is engaged in the activity involving boats and other motorized assets. For instance, you can give away your boat to a boating school, Sea Scout troop, or marine research.
You must also verify that the charity is involved in regular boating activity with a fleet of well-maintained boats and having well-documented logs that vindicate the charity’s boating activity.
According to the regulations, within 30 days of donating your boat, the charity must provide you a 1098-C form and concurrently written acknowledgement.
If you wish to claim the fair market value, the 1098-C form must specify the vessel will not be sold before any intervening use or material upgrades.
If the donor were to benefit from the deductions, the charity must give the Donor Acknowledgement (part IV) form. The form specifies the donated asset (boat) will not be used for any other purpose than what is indicated. At the time of claiming deductions, the donor must submit the form with acknowledgement,
If the boat is sold by the charity in less than 3 years of donation the charity must compulsorily fill the IRS form 8282. The IRS will be alerted about the selling price of the boat and the history of its usage. It gets sweeter for the donor in the form of fat deductions when the charity has logged more activities with the boat.
Defining the good “significant intervening use” seems to be the confusing aspect of donating the boat. The IRS has not elaborated the definition of the quoted clause. After foraging for details from various tax experts, we come to a conclusion that 100-200 hours of usage per year justifies the “significant intervening use”. But, many charities that use donated boats are known to log regularly, the activities.
Although, it is unlikely for you to find a scripted document that indicates the exact prerequisites, it is best that you consult an IRS specialist before donating the vessel. It helps you reach a conclusion with regards to the framework of intended use will qualify you for a fair market value donation. By donating the boat, you would be helping the charity with its activities, it will benefit the charity while the vessel is in use and also when it is sold at a later stage.
Donating a boat or any motorized asset is still considered as a philanthropic effort. So if you are planning to give away your boat, you must do so with necessary planning, research and pro guidance from a Tax specialist.