If your boat is costing you money in repairs, taking up space in your backyard, or just not a model you're interested in anymore, you could consider donating it to charity. You'll be contributing to the improved operations of impactful charitable missions, and you can claim a boat donation tax deduction.

An important requirement for this process is concretely following IRS (Internal Revenue Service) tax deduction rules. They're not as straightforward as you'd think, but don't worry—this article breaks everything down. Learn how tax deduction on a boat donation works, the IRS rules that'll guide your tax deduction filing process, and the best ways to maximize your tax savings.

How Do Tax Deductions on Boat Donations Work?

The value of your boat and what the charity does with it after donation determine your tax deduction. There are two main scenarios.

  1. The charity sells your boat: If they sell your boat, the gross proceeds from the sale limit what you can claim on tax deduction. It's important to note that even if the sale price is less than the boat's Fair Market Value (FMV), your tax deduction claim can't change. This is why you should understand how the organization plans to use your donation before anything else.
  2. The charity uses your boat: If the charity uses your boat for their day-to-day operations, instead—like transporting people or delivering large supplies—your boat's FMV at the time of donation determines what tax deductions you can file on tax returns. This can still be subject to certain limitations based on your Adjusted Gross Income (AGI) and other factors.

Determining the Fair Market Value of Your Boat

The FMV of your boat is what it is worth on the open market. If the charity decides to use your boat, it's important to generate an accurate IRS-guided FMV for it, as this will help your tax deduction claim.

Common Methods for Boat Valuation

  • Research boat's pricing guides: Use credible boat pricing guides like the J.D. Power Boat Pricing Guide to understand the desirability of your boat's model, its performance, reputation, and additional features like upgraded engines, navigation systems, etc. These factors help you determine your boat’s pricing and its market value.
  • Check sales of comparable boats: Find out about the sale prices of similar boats in your location with the same model, age, and functionalities. Look into prices from private individuals’ sales more, as they'll reflect a more authentic FMV than prices from dealers.
  • Hire a marine surveyor: You can hire a skilled marine surveyor to expertly and accurately determine your boat's FMV. The surveyor should do a comprehensive evaluation of your boat's seaworthiness and actual condition. If the boat's value after evaluation is above $5,000, the surveyor should create an appraisal for it within 60 days of its donation.
  • Document your process: Track down every step of how you created your boat's FMV and keep a detailed record of each one. Used pricing guides? List them. Hired a marine surveyor? Keep your appraisal close. Consulted sales prices listing? Write them down. These documents will help support your FMV claim.

In all, remember to regularly check with the IRS guidelines for vehicle donations, as it'll help you avoid common mistakes.

Eligibility Criteria for Boat Donation Tax Deductions

You're eligible for a tax deduction on a boat donation if you fulfill these two requirements:

  • Donate to an IRS-approved charity: Only donations made to tax-exempt organizations are eligible for tax deductions. These organizations are anything from charities to religious organizations, scientific entities, and educational institutions, but they'll typically have a 501(c)(3) status with the IRS. It's not hard to find one as the IRS comprehensively lists them in its database. Check here or call the IRS at 877-829-5500 to directly confirm the charity’s name and address from them.
  • Itemize deductions: Keep in mind that you must opt for itemized deductions based on the Schedule A of Form 1040 on your tax return instead of using the standard deduction. Itemizing your tax deductions makes you eligible to claim the value of the boat donation alongside other valid expenses.

Necessary Documentation for Claiming Tax Deductions

You'll need to keep certain documents on hand when filing for a tax deduction. These documents include:

Contemporaneous Written Acknowledgment (CWA)

The charity receiving your boat donation must send you a CWA, whether they sell or use your boat. This acknowledgment should include details like the organization's name, the date of the donation, a description of the boat, and a statement confirming if there was an exchange of goods and services for the boat. See more in the IRS Publication 1771.

IRS Form 8283

When filing for a tax deduction of more than $500 on your tax return, you must fill out the IRS Form 8283, Noncash Charitable Contributions. This is where you'll need the documentation about your boat's FMV value. The form requires you to accurately report on very specific details about your donation and the boat's value.

IRS Form 1098-C

If the charity sells your boat for more than $500, it must provide a written document with the sale price, which is the amount you can use as a tax deduction. The document, Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, must be provided within 30 days. It should contain the date of the boat's sale, a statement confirming that the sale wasn't to an employee or a related party at a discount, and the gross proceeds from the sale. 

A Copy of the Appraisal 

If you’ve received an appraisal from an expert marine surveyor, you'll need it when claiming a tax deduction. The appraisal must contain specific details about how and why your boat is worth $5,000 or more. See IRS Publication 561, Determining the Value of Donated Property, for more information.

Limits and Regulations on Boat Donation Deductions

When claiming a tax deduction on boat donations, here are a few important things to note:

  • Donation to private foundations: You can't claim a tax deduction on a donation to privately held organizations, as they are not listed as tax-exempt entities with the IRS.
  • Limits on Adjusted Gross Income (AGI) limit: The amount you can claim on tax deduction for a boat donation is generally limited to 60% of your AGI. In some cases, the limit may fall between 20% and 50% AGI, depending on where the organization is located. If your boat donation exceeds a certain amount, there's a possibility that you can carry over the excess tax deduction for up to five consecutive years.

How to Maximize Your Tax Deduction Through Boat Donation: 6 Best Practices

Want to streamline your boat donation tax deduction process? Follow these simple yet effective steps.

1. Choose the Right Charity Organization

Your choice of charity will not just determine how much you get to claim on tax deductions but is also reflective of your values. The right charity has a track record of efficiency and transparency and will work towards getting you the best possible deal on your boat. 

At Rawhide, we've processed vehicle and boat donations for over 30 years. Our process is transparent yet simple for donors—we do all the hard work in the background.

2. Seek Professional Advice on Boat Donation Tax Deduction Rules 

Wanting a tax break on a boat donation is a slippery slope. One easy way to bypass it is consulting with a professional. If you have doubts or need to confirm rule amendments or updates, hiring a tax advisor or accountant is your best bet for getting clarity and closure. 

Tax advisor fees too high? Try contacting the charity directly for guidance. Some charities help potential donors save money on hiring professionals by offering free consultations with their team of in-house professionals who can help with the filing process. At Rawhide, you can find quick answers to general boat donation questions when you visit our FAQs page. If you need something more in-depth, please feel free to contact us directly.

3. Time Your Donation 

For the highest valuation, aim to donate your boat during peak seasons, usually between April and July. This is when boat sales are high, so you can expect your boat to have a worthwhile FMV. This will consequently increase the amount of your tax deduction claim when you file.

4. Secure Proof of Ownership 

If you've owned the boat you're donating for a long time, do you know where the title is? Don't wait until it's too late to check, as this can hamper a seamless transfer of ownership. Can’t find your title? No problem. Immediately order a replacement or duplicate title and ensure other forms of proof of ownership—like your insurance papers or registration documents—are intact.

5. Understand Your State Requirements 

State requirements often vary, so be sure to learn which specifically applies to yours. Understanding your state laws and any additional steps you need to take can hasten your boat donation process.

6. Follow IRS rules and Requirements

Tax deductions can be tricky. Failing to file the correct forms, choose the right type of charity, or follow the IRS rules may mean you can’t receive a deduction at all. Consult the IRS website and seek professional advice if needed so you can ensure that all is in check.

Partnering with Rawhide for Effective Boat Donation

If you’re thinking of donating your boat, consider contributing to Rawhide Youth Services. Your boat donation will assist the continued development of many of our programs, including intensive education and counseling for the at-risk youth in our care. In addition, you may also benefit from a boat donation tax deduction. Our in-house professional support and decades of expertise in processing boat donations will make the process seamless while giving you the best possible experience.

Interested in joining our mission? Donate your boat today and explore other ways to help our cause.