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Can I Claim My Auto Insurance Deductible on My Taxes?

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After a car accident, paying the deductible part of the repair bill is often painful. Writing it off on your taxes can reduce at least a little of the pain. Federal tax law does allow you to take a deduction for the accidental damage or theft of your car. Given the limits on the write-off, though, you may not have much success claiming it.

Casualty and Theft

Any time something you own is damaged, you suffer a loss. Some of that loss may be deductible. This applies to car accidents, but only if you're not responsible. The IRS says if your "willful negligence or willful act" caused the accident, there's no deduction. If someone steals your car, that also counts as a deductible loss. That includes fraud -- tricking you into giving up the car -- as well as taking it by force.

Figuring a Loss

You can't simply bill the IRS for the cost of repairs. To figure your loss, you calculate your car's adjusted basis, which is usually the amount you paid for it. Then figure out how much its value went down because of the damage. The smaller number of the two is the amount of your loss. You can't claim $1,000 in repairs as a loss, but you can use the cost of repairs as proof of how big the loss was. If your car's stolen, you lose 100 percent of its value.

Trimming the Deduction

Before you claim your loss, subtract whatever your insurer paid you. Then you have to deduct $100 from the amount. If you claim multiple car losses, you deduct $100 from each loss. Add up all your total losses -- including any other thefts, fire damage to your house, etc. -- and subtract 10 percent of your adjusted gross income from the total. Whatever you have left is deductible. If your only loss is, say, $500 of car damage, you probably won't be able to write it off.

Filing the Claim

You can only write off losses if you itemize deductions. Casualty and theft losses are a 2 percent deduction, like unreimbursed employee expenses and the cost of hiring a tax-prep firm. You add all such deductions together, then subtract 2 percent of your adjusted gross income. Once again, your deduction is whatever you have left after subtraction. If you take the standard deduction, you'll have to eat your auto insurance deductible.

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SOURCE - The Nest - Can I Claim My Auto Insurance Deductible on My Taxes?

Posted Sunday, February 04 2018 10:30 AM
Tags : Automobile Insurance

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