How Form 1098-C Applies to Your Vehicle Donation Deduction

Donating a vehicle to a charity is a great way to give back to your favorite organization and may also allow you to receive a tax deduction. When you donate a qualified vehicle valued at more than $500, the organization files Form 1098-C to report the details of the donation and provide you with a copy for your return.

 Understanding Form 1098-C

Let’s review a few definitions and situations to understand how the rules apply when Form 1098-C (Contributions of Motor Vehicles, Boats and Airplanes) is filed. For the purpose of your donation, a qualified vehicle is defined as:

  • A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways,
  • A boat, or
  • An airplane.

Deductions of More Than $500

For contributions of qualified vehicles with a claimed fair market value (FMV) of more than $500, the charitable deduction amount will be determined by one of the following two situations, whichever is less:

  • The gross sales proceeds from when the organization sells the vehicle, or
  • The vehicle’s fair market value (FMV) on the date of the contribution. If the vehicle’s FMV is more than your cost or other basis, the taxpayer may have to reduce the FMV to figure the deductible amount.

Required documentation –  The charitable organization should send you Copy B of Form 1098-C (or other statement with the same information) within 30 days of the vehicle donation or sale. If you e-file your tax return, you’ll need to mail a copy of Form 1098-C to the IRS along with Form 8453 after you e-file, or include Form 1098-C as a PDF attachment if your tax software allows. The 1098-C shows the gross proceeds from the sale of the vehicle unless one of the following two exceptions applies. If applicable, the exception will be indicated on your form when the organization:

  • Makes significant use of or a material improvement to the vehicle, or
  • Gives or sells the vehicle to a needy individual for a below-market price.

If you not receive Form 1098-C by the filing deadline, you may either request an extension or file the return without claiming the deduction, and amend the return after receiving Form 1098-C.

Deductions of $500 or Less

If the qualified organization sells the vehicle for $500 or less and the exceptions above do not apply, you can deduct the smaller of $500 or the vehicle’s FMV on the date of contribution. If the vehicle’s FMV was more than your cost or other basis, you may have to reduce the FMV to get the deductible amount.

Required documentation – If the vehicle’s FMV is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging the donation.

Additional 1098-C Tax Form Questions

For more information, refer to the Form 1098-C Instructions and IRS Publication 526. If you have additional questions about vehicle donation deductions or need help filing your return, our knowledgeable Tax Pros can help.

Make an Appointment with one of our Tax Pros today.

 

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