An automobile accident can be a physically, emotionally and financially jarring experience. In a study by the National Highway Traffic Safety Administration, the human and financial costs of car crashes were $871 billion in 2010. As a driver with regular business vehicle use, this invites the question, “Are automobile accidents tax deductible?” Unreimbursed vehicular damages arising from accidents can be deducted to an extent by the casualty loss deduction.
The casualty loss deduction applies to property losses suffered from a number of unexpected events, like vehicle damage incurred from an accident. However, the deduction can only be claimed when you are not at fault and when the loss incurred is at least partially unreimbursed. For personal property, such as a personal vehicle, the casualty loss must, in addition, exceed 10 percent of your adjusted gross income.
This means that if you got into an accident but were reimbursed in full from the insurance company of the driver at fault, you are not eligible to deduct this loss. If, however, you were only partially reimbursed, you may be eligible to deduct casualty losses for the unreimbursed portion of the damages in the year that the accident occurred.
To measure casualty loss for property that is for personal use or is not completely destroyed, the IRS dictates that you use the lesser of either:
1. the property’s adjusted basis before the loss or
2. its decline in fair market value due to the casualty.
From this amount, subtract reimbursements like insurance. In addition, you must subtract an additional $100 per loss event and 10 percent of your adjusted gross income. These two reductions don’t apply if the property is for business activity.
In addition, when business property is completely destroyed, you can use the adjusted basis minus the salvage value and reimbursements. Adjusted basis refers to the original cost of acquiring your property, plus improvement costs, minus prior casualty loss deductions and depreciation.
For example: Miles the chauffeur is in an accident in which the vehicle he relies on 100 percent for business is partially damaged. The fair market value of his vehicle was $20,000 prior to the accident and is $12,000 after the accident. From the $8,000 difference, he subtracts an insurance reimbursement of $3,000. His deduction is $5,000. See IRS Publication 547 for more example casualty loss calculations.
Insufficient documentation for this deduction may cause your tax return to be flagged by the IRS. Therefore, you must be able to prove that you are the owner of the vehicle and that you have properly accounted for both its pre- and post-accident value, along with any reimbursements. While you’re keeping an eye on the road, an automatic mileage tracker like MileIQ will keep an eye out on your mileage logs for business vehicle use so that you can maximize your mileage deductions and put a significant dent in your tax bill.
The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.
A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!
Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.