Before you hand over one of your biggest assets to a charitable organization, read the following to make sure you are making the right moves.
1. Avoid the middlemen. Lots of for-profit intermediary organizations advertise aggressively on TV, billboards, and elsewhere. They offer to help you donate your vehicle to charity. However, there is a catch: These organizations usually keep around 50%-90% of the vehicle’s value for themselves, and the charities don’t receive what they could have gotten if you had donated directly. To prevent this, check directly with your charity of choice to find out whether they are able to your boat donation. Charities, like the Giving Center, often have quick response times.
2. Find a worthy charity. If the charities you regularly support are not equipped to accept a boat donation, do some research until you find a reputable charity that is.
3. Check the math. If you feel compelled to use an intermediary organization — possibly because you are simply too busy — at the very least ask the organization how much of the donated boat’s value will actually go to charity. If the organization you are looking at only gives charities flat fees — say, $100 for a used boat regardless of its value, or $2,000 a month — your donation may not be eligible for a tax deduction.
4. Know the IRS status of your chosen charity. For you to qualify for a deduction, the charity that receives your donation has to be an IRS-approved 501(c)(3) organization. Besides charities like Giving Center, your local church, synagogue, mosque, or temple likely qualifies. (Remember to check first just to make sure.) You may also visit the Internal Revenue Service’s Web site and search for Publication 78 to find other non-profit organizations that qualify.
5. Transfer the boat with care. The best way to eliminate the risk of running up parking tickets or other violations after you have donated your boat is to formally re-title the vehicle to the charitable organization, and report the transfer to your state’s department of motor vehicles or licensing.
6. Your estimate of the donation’s value probably may not cut it. If your boat is worth more than $500, the IRS will want to see evidence of how much the charity got for it as most charities that accept these donations turn around and sell them for the proceeds. You will need to get a receipt from the charity revealing exactly how much money they received for the sale of your boat.
7. When to report the fair market value. You won’t need evidence of the sales price if the charity decides to keep the vessel and uses it for their charitable work, or if your donation is valued less than $500. In this case, you can report its fair market value (FMV) based on listings from Kelley Blue Book and similar sources.
8. Keep a paper trail. If your donation is valued over $500, you will have to attach IRS Form 8283 to your tax return. If it is worth more than $5,000, your documents must include an outside appraisal with a signature. You will also need proof of the donation made, such as a receipt from the charity.
9. Be detail-oriented. This paper trail may seem unnecessary, but think about it: This is probably one of the biggest charitable donations you will ever make. By taking the time collect all documents for the echange, you can ensure that the charity gets the most benefit as well as the biggest possible tax deduction for yourself.
