How to Follow IRS Boat Donation Rules

Donating a boat to a qualified charity involves specific Internal Revenue Service (IRS) regulations. The tax deduction you can claim is directly linked to the charity’s subsequent use or sale of the vessel, which dictates the value of your deduction and the forms you must secure.

Determining the Deduction Amount

The value of your tax deduction for a donated boat is limited to the gross proceeds the charity receives from its sale. This rule applies if you claim a deduction of more than $500. For example, if a charity sells your donated boat for $4,000, your deduction is capped at that amount, regardless of your own valuation.

Two exceptions may allow you to deduct the boat’s Fair Market Value (FMV) instead of the sale price. The first is if the charity makes a “significant intervening use” of the boat, meaning the organization uses the vessel to further its charitable purpose. A marine biology organization using the boat for research or a youth group using it for training programs are examples of this.

The second exception applies if the charity makes “material improvements” to the vessel before selling it. A material improvement is a repair or enhancement that increases the boat’s value, beyond routine maintenance like cleaning or paint touch-ups. Rebuilding the engine or installing a new navigation system are examples of material improvements.

If the charity plans to make a significant use or material improvement, it must provide you with a written certification of its intent. Without this documentation, your deduction is restricted to the amount for which the vessel sold.

Appraisal and Valuation Rules

You must establish the boat’s Fair Market Value (FMV), which is the price a willing buyer would pay a willing seller. For boats valued at $5,000 or less, you can determine FMV using established pricing guides or by researching sales of comparable vessels.

A formal appraisal is required for a deduction of more than $5,000. This must be a “qualified appraisal” from a “qualified appraiser,” who is a professional with credentials or experience in valuing such property. The appraiser cannot be the donor, the charity, or a party to the transaction.

The appraisal must be completed no more than 60 days before you donate the boat to reflect its current condition. The cost of the appraisal is not a deductible expense.

Required Donation Paperwork

For any contribution over $250, you need a “contemporaneous written acknowledgment” from the charity. This document must include the charity’s name, a description of the boat, and a statement about whether you received any goods or services in return.

For a boat donation valued over $500, the primary document is Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes. The charity must send you a copy of this form within 30 days of selling the boat or, if an exception applies, within 30 days of the donation. You must have this form before filing your tax return.

Form 1098-C provides the information for your tax return. It will show the gross proceeds from the sale, which is your deduction amount. If the charity certifies its intent for significant use or material improvement on the form, you may be able to claim the boat’s Fair Market Value instead.

Claiming the Deduction on Your Tax Return

With your paperwork in order, you claim the deduction using Form 8283, Noncash Charitable Contributions, which is attached to your Form 1040.

The section of Form 8283 you complete depends on the boat’s value. For a claimed value of $5,000 or less, you will fill out Section A. This section requires information about the charity, a description of the boat, the date of the contribution, and its Fair Market Value. You must attach the Form 1098-C you received from the charity to your return.

If your deduction is more than $5,000, you must complete Section B. This section requires an appraisal summary signed by both your qualified appraiser and a representative from the charity. This signed form is filed with your tax return along with Form 1098-C.

The total from Form 8283 is carried over to Schedule A, Itemized Deductions. To claim a charitable contribution, you must itemize your deductions.