Today TaxMama hears from Ken who asks. “My wife was in a small fender bender that we did not report to the insurance company. We paid for the repair ourselves ($2000). Is this deductible on my tax return?”
Dear Ken,
I do hope she’s all right!
Can you deduct it as a casualty loss? Perhaps. But the cost/loss must be more than 10% of your adjusted gross income (the amount on the last line of your 1040’s page 1) plus $100. So, if you’re earning more than $20,000…there’s not much chance of that deduction working.
If she was using the car for business, the casualty loss might work, with the deduction appearing on her Schedule C, for the business use % of the cost.
If she was using the car on her job, for business purposes, perhaps it could be an employee business deduction.
The only problem? And you’re going to hate this.
IRS has a pretty firm policy, if you could have gotten a reimbursement for an expense (from an employer or insurance company), but chose not to submit the expense, they won’t allow you the deduction.
Yes, yes, I know, you didn’t want to raise your insurance rates. I do understand. Totally. Bear in mind, if your state requires damages in excess of $500 (or some specific amount) to be reported to your department of motor vehicles, it’s going on her record anyway. So, you may as well submit the bill for reimbursement to your insurance company. If they’re going to raise your rates, it will be for the accident, not the reimbursement request.
But the tax code does not act as a replacement form or reimbursement if you don’t pursue your legal avenues for reimbursement. Doncha just hate that!
So look into your alternatives and see what works.
And remember, you can find answers to questions about body damage and all kinds of other tax issues, free. Where? Where else? At TaxMama.com
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