The Federal Government encourages donations of property to public, nonprofit charities. The same tax deductions are permitted for donations of property as for cash donations. This is not a tax loophole but a defined recognition on the part of Congress of the importance of such a gift to a qualified, IRS approved organization.
The Internal Revenue Service distributes several publications to guide the public and their tax advisors in determining the best way to handle their property contributions, Publication #526, Charitable Contributions and #561, Determining the Value of Donated Property.
Generally, you may deduct an amount of up to 50% of your adjusted gross income. If your contribution exceeds 50% of your gross income, you may deduct the excess in the five succeeding years until it is used up.
If you donate your boat to a qualified organization, you may gradually deduct the fair market value at the time of the contribution. The value of your boat is determined by an appraisal from an expert in the field related to your property. The IRS, in their Publication #561, suggests using marine surveyors and published market guides to help determine the fair market value.
Once you have decided to dispose of your boat, you must determine which method is the quickest and most financially rewarding, an outright sale or a property donation.
In looking at a sale, you must take into consideration all of the expenses you must expect. Dockage, insurance, maintenance, storage, repairs, financial investment, interest and sale commission are a few of the expenses to be expected before you sell your boat. After you have signed a sale contract and the purchaser surveys the boat, you will probably be met with more expenses. There are always unforeseen repair items that need to be corrected after a purchaser’s marine survey and trial run. In most cases, the buyer expects the owner to adjust the sale price downward or have the seller pay for the needed survey repairs.
Another problem in trying to sell your boat outright is the time factor. The time of the year, in most areas of the U.S., has a great deal to do with availability of ready buyers. The colder, winter months seem to drive buyers indoors and prices down.
With a donation of your boat, all expenses end immediately. There are no sale commissions to pay and the entire transaction is completed in a few days. You do not have to wait six months to a year and then find out that your net return is far less than expected.