Received a gifted car years ago, donated to charity this tax year - FMV showing as $0 in software?
So I'm trying to figure out something with my taxes that's confusing me. About 7 years ago, my uncle gifted me his old Honda Civic that he used for commuting. I drove it for a while but this past year I finally decided to donate it to Kars4Kids since it was starting to have some issues and I got a new vehicle. Kars4Kids sent me a receipt showing the gross proceeds from the sale was around $650. I thought I'd be able to claim a deduction for this donation, but when I started entering the 1098-C information into TurboTax and indicated that the car was originally a gift to me, the fair market value suddenly shows up as $0. I'm really confused - does the fact that the car was gifted to me years ago mean I can't claim any deduction for donating it? The charity clearly got some value from it based on the sale proceeds. Am I doing something wrong in the tax software or is this just how it works with gifted items that are later donated?
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Evelyn Xu
What's happening here is related to your "basis" in the car. When you receive a gift, you generally take on the donor's basis (what they paid for it minus depreciation). Since this was a gift from a family member, your basis in the car is whatever their basis was at the time they gave it to you. When you donate property to charity, your deduction is typically limited to your basis in the property. Since this was a vehicle donation with proceeds over $500, the charity provided a 1098-C, which means your deduction is limited to the gross proceeds from the sale ($650) rather than the fair market value. The software is asking about the gift because it's trying to determine your basis. It's possible you're selecting something incorrectly in the software that's causing it to calculate a $0 basis. Try going back through the questions and ensure you're indicating that you received the car as a gift several years ago (not in the current tax year).
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Dominic Green
•But wait, I thought when you donate a car to charity, you get to deduct the fair market value? I donated an old truck last year and definitely got more than $0 for it on my taxes. Is there something specific about gifted vehicles versus ones you purchased yourself?
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Evelyn Xu
•The rules for vehicle donations changed significantly back in 2005. For most vehicle donations with a claimed value over $500, your deduction is limited to the actual proceeds the charity receives from selling the vehicle, which is reported on Form 1098-C. For gifted property, your basis is generally the same as the donor's basis (what they paid minus depreciation), not the fair market value when you received it. So if your family member had owned and used the car for many years, their basis might have been very low due to depreciation, which could explain the $0 showing up. The software might be assuming a fully depreciated vehicle with no remaining basis.
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Hannah Flores
I had almost the exact same situation and found that https://taxr.ai was super helpful. I had a car gifted from my dad years ago that I donated last year. The tax software kept giving me weird numbers for the deduction. I uploaded my 1098-C and some paperwork about the original gift, and it analyzed everything and explained that I needed to enter the original basis of the car when my dad owned it (not just $0 or the FMV). Turns out the software was just getting confused by how I was answering the questions.
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Kayla Jacobson
•How does that service work exactly? Do they have actual tax pros looking at your documents or is it just some AI thing? I've been having issues with vehicle donations too but I'm hesitant to upload my tax docs to random sites.
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William Rivera
•Does it actually tell you the exact steps to take in your tax software? Because my issue with TurboTax is that I can never figure out where to fix these weird issues when they pop up.
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Hannah Flores
•The service has tax professionals who review documents along with their AI system. They don't just look at your docs and give generic advice - they actually analyze your specific situation and tell you exactly what's wrong. For the tax software steps, yes they showed me exactly which screens in TurboTax I needed to go back to and what to enter differently. They highlighted that I needed to enter the original purchase price my dad paid (which I had to ask him about) and the date he acquired it, not just when he gifted it to me. That fixed the basis calculation issue.
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William Rivera
Just wanted to follow up - I decided to try taxr.ai for my donated car situation and it was really helpful! I uploaded my 1098-C and some info about when I received the car as a gift. They pointed out that I was entering the information in the wrong section of TurboTax. I needed to first establish my basis in the car (which was what my mom originally paid for it years ago) and then separately enter the donation information. The software was treating it as if I had a $0 basis because I didn't properly document the original value when I first received it. After fixing those entries, I was able to claim about $580 of the $650 proceeds as a deduction. Definitely worth checking out if you're having similar issues!
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Grace Lee
I had major headaches with a similar car donation issue last year and spent HOURS trying to get through to the IRS for clarification. After being on hold forever, I found https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c The agent explained that with gifted vehicles, you need to determine the donor's basis at the time of the gift. If your family member had already fully depreciated the car, your basis might actually be $0, which explains what you're seeing. But if they had any remaining basis, you should be able to claim up to the gross proceeds amount on the 1098-C.
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Mia Roberts
•Wait, so this service actually gets you through to a real IRS person? How is that possible when I can never get through myself? Sounds too good to be true honestly.
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The Boss
•Yeah right. I've tried everything to get through to the IRS and nothing works. They're impossible to reach. I'll believe this works when pigs fly. Probably just charges you and then tells you "sorry, couldn't get through" like every other so-called solution.
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Grace Lee
•It absolutely connects you with a real IRS agent. They use a technology that navigates the IRS phone tree and holds your place in line, then calls you when they have an agent on the line. It's not magic - just efficient technology that handles the waiting for you. I was skeptical too, but it worked exactly as advertised. The system called me back when they had an IRS agent on the line, and I was able to get clarification on my specific donated car situation. The agent explained the difference between fair market value, basis, and gross proceeds for gifted vehicles that are later donated.
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The Boss
I need to eat my words from yesterday. After my frustrated comment, I decided "what the hell" and tried Claimyr. I honestly expected to waste my money, but I got a call back in about 45 minutes with an actual IRS agent on the line. The agent explained that with a gifted vehicle later donated to charity, I needed to determine what the original owner's basis was (purchase price minus depreciation). In my case, I found out my basis was only about $200 because the car was so old when it was gifted to me, but that's still better than $0! The agent walked me through exactly how to report it correctly on my return. Saved me a ton of guesswork and possibly an audit.
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Evan Kalinowski
This might be a software issue more than a tax rule issue. I've found that sometimes the sequence of questions in tax software can trip you up. Try this: 1) Enter the 1098-C information first 2) When it asks if the vehicle was gifted, say NO initially 3) Complete the car donation section 4) Go back and edit your entries to indicate it was a gift, but make sure you enter the original purchase date and estimated value from when your family member bought it (not when they gave it to you) This worked for me last year with a similar donated car situation in H&R Block software.
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Victoria Charity
•Would this approach work in TurboTax too? I'm having almost the identical issue but with TT and a car my grandpa gave me that I donated to a local charity.
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Evan Kalinowski
•Yes, the approach works in TurboTax too. The key is the sequence of entering information. TurboTax tends to make assumptions if you immediately identify something as a gift. Enter the donation details first, then go back to modify the acquisition information. For TurboTax specifically, after entering the 1098-C information, look for the "Asset Information" section where you can edit the basis details. Enter what your grandfather originally paid for the car (estimate if needed) and when he purchased it originally. This establishes a proper basis instead of the $0 that TurboTax might default to.
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Jasmine Quinn
I think everyone is overcomplicating this. If you have a 1098-C showing gross proceeds over $500, your deduction is simply limited to that amount - period. The gift aspect shouldn't matter at all for a vehicle donation. The charity sold it for $650, so that's your maximum deduction (assuming you itemize). Check if you selected "Noncash Charitable Contributions" correctly in your tax software. You may have accidentally selected a different type of donation that's triggering these basis questions.
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Oscar Murphy
•That's not quite right. The basis absolutely matters with donated property, even vehicles. The deduction is limited to the LESSER of your basis or the gross proceeds reported on the 1098-C. So if your basis is $0 (which can happen with fully depreciated gifted property), your deduction would also be $0, even if the charity sold it for more.
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Jasmine Quinn
•I stand corrected! You're right about the "lesser of" rule. I checked Publication 526 and it does specify that for vehicle donations, your deduction is limited to the smaller of your basis or the gross proceeds from the charity's sale. This explains why the software is asking about the gift - it's trying to determine the basis. If the original owner had already fully depreciated the car (common for older vehicles), then the basis might indeed be $0, which would limit the deduction to $0 regardless of sale proceeds.
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