Preparing for Donating Your Boat – How to Protect Your Interest?
If you own a boat and want to liquidate it, you should avail the tax concessions arising from the act of charity by giving away the boat to a qualified non-profit organization. The federal government encourages vehicle/vessel donation that comprises of donating cars and boats for a charitable purpose, and the recipient must be a non-profit organization according to the rules of the IRS (Internal Revenue Service). The tax advantage is the primary reason why boat donation is so popular.
However, before deciding to donate the vessel, you must be familiar with the latest rules and regulations of IRS on the issue of donations. It would help to can reap the maximum advantage of tax deduction from the transaction. Either the donors do not understand the IRS laws that keep changing or the lack of clarity about it necessitates learning about the implications of boat donations before donating. How donors can protect their interest in donating boats will become clear after reading this article.
Guidelines for donating boats
When you decide to give away your old boat as a gift with the intention of helping others, you must make sure that the recipient organization qualifies as the right non-profit organization. Because IRS encourages people to extend financial support to these agencies through charity, which in turn helps you to receive the tax deductions, choosing the right organization is fundamental to the process. Therefore, doing proper homework before donating is must or else you would fail to avail the maximum tax deduction that corresponds to the fair market value.
Maximize the tax deduction
It is natural that you would like to avail the maximum tax deduction from the charity. To make this happen, you should be in a position to claim the fair market value of the vessel and must work towards it. For ascertaining the fair market value of the boat, get in touch with a certified marine appraiser or surveyor who judges the price of the boat by moderating it with selling price or listing of other similar vessels. However, do not forget to share with the surveyor all details about the boat including additions, alterations, and replacements that you have done to the boat because it could enhance its valuation. It is mandatory to get the appraisal done for boats valued above $5000.
Significant intervening use
The phrase ‘significant intervening use’ as stated in the IRS regulation is critical for donors intending to avail tax deductions. The charity that receives the boat must use it for their daily activities for a period of at least three years before they can liquidate it. If the liquidation happens before three years, the donor’s tax deduction would be restricted to the amount the charity received for the vessel. If the liquidation price is quite less than the fair market value that you claim for a tax deduction, the actual benefit that you receive would be much less.
Only when you are sure of locating the right non-profit organization that meets the stipulations of IRS that should you proceed for charity.
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