@KarlaS wrote:
Thank you for your help. I followed the prompts just as instructed but I wanted to double check. Since I reported the "loss" in the vehicle section of the business section (as instructed in your helpful post), I don't need to create an entry for personal part of the vehicle loss under "Casualty and Theft Events" in the "Other Deduction and Credits" section? Is that right?
There are two parts to your question.
Any personal casualty loss can only be deducted if the loss was caused by a federally declared disaster, like a flood, hurricane, etc. You can also only take the loss after making any insurance claim that you are entitled to.
For a business vehicle, you have the possibility of a taxable gain when you dispose of it. When you deduct business use of a vehicle, you deduct depreciation (wear and tear) which reduces your cost basis. For example, suppose you paid $20,000 for the car, and you deducted $15,000 of depreciation. If you sell the car for $6,000, you have a $1000 taxable gain, because your sales price is more than the depreciated cost of the car, you are recovering part of your previous depreciation deduction, and a recovery of a previous deduction is taxable. Now, if your business vehicle is wrecked/destroyed/stolen, etc., you treat it as though you "sold" it to the insurance company for the price of the insurance payment.
Unless your loss was due to a declared disaster, you only have to deal with the business situation. So what you mainly have to do is to remove the vehicle from the business, and explain why, so that Turbotax can determine whether you had a deductible loss, a taxable gain, or simply no tax consequences of the loss (the most likely outcome). In most cases, if you have been using a personal vehicle for business part-time and taking the standard mileage rate method, your depreciation won't be enough to create a taxable gain situation.
Thank you for your help. I followed the prompts just as instructed but I wanted to double check. Since I reported the "loss" in the vehicle section of the business section (as instructed in your helpful post), I don't need to create an entry for personal part of the vehicle loss under "Casualty and Theft Events" in the "Other Deduction and Credits" section? Is that right?
@KarlaS wrote:
Thank you for your help. I followed the prompts just as instructed but I wanted to double check. Since I reported the "loss" in the vehicle section of the business section (as instructed in your helpful post), I don't need to create an entry for personal part of the vehicle loss under "Casualty and Theft Events" in the "Other Deduction and Credits" section? Is that right?
There are two parts to your question.
Any personal casualty loss can only be deducted if the loss was caused by a federally declared disaster, like a flood, hurricane, etc. You can also only take the loss after making any insurance claim that you are entitled to.
For a business vehicle, you have the possibility of a taxable gain when you dispose of it. When you deduct business use of a vehicle, you deduct depreciation (wear and tear) which reduces your cost basis. For example, suppose you paid $20,000 for the car, and you deducted $15,000 of depreciation. If you sell the car for $6,000, you have a $1000 taxable gain, because your sales price is more than the depreciated cost of the car, you are recovering part of your previous depreciation deduction, and a recovery of a previous deduction is taxable. Now, if your business vehicle is wrecked/destroyed/stolen, etc., you treat it as though you "sold" it to the insurance company for the price of the insurance payment.
Unless your loss was due to a declared disaster, you only have to deal with the business situation. So what you mainly have to do is to remove the vehicle from the business, and explain why, so that Turbotax can determine whether you had a deductible loss, a taxable gain, or simply no tax consequences of the loss (the most likely outcome). In most cases, if you have been using a personal vehicle for business part-time and taking the standard mileage rate method, your depreciation won't be enough to create a taxable gain situation.
Thank you all for your help. My question has been answered thoroughly.
The amount paid to me by the insurance company was less than the note on my loan. Do I put zero for the sales price?
If you disposed of a business vehicle due to an insurance loss, the price paid by the insurance company is the “sales price” of the vehicle, even if you were underwater at the time.