Reporting casualty loss, salvage sale and replacement of car used for work and personal

cliffbrou · ‎February 23, 2021

I really need help figuring out how to file all the right values in the right places! TTAX Self Employed isn't very friendly on this one!

Here's the situation. I drive rideshare/delivery as my only income. I started the year in one car, let's call it a Chevy. I drove about 12k miles for work and about 1k personal until May, when the engine blew. (Connecting rods broke and it punched holes in the engine block.)

Since it wasn't insured for this, I received no insurance payments, and since it wasn't worth the repair costs, I sold it as-is for about $3500 soon after. Before the engine blew, it was worth about $8000.

In July, I bought a used Prius for $6000. Through the rest of the year, I used it for business (12k miles) and personal (6k miles).

Because of COVID, I didn't need a car to go anywhere, so I didn't rent a car. In fact, I only needed to book an Uber once, before getting a replacement. No other expenses, except for a towing charge.

So, I assume I have a casualty loss on the Chevy, but I don't know how to handle the fact that I stopped using it last year for business (and personal), sold it for salvage value of $3500, lost $4500 in the value of the car, and how to split the various numbers between business and personal use, and what to put on what forms. TTAX SE isn't helping either.

Can anyone help?

ReneeM7122 · ‎February 24, 2021

Unfortunately, though COVID prevented you from driving your rideshare vehicle for work, it is not considered a casualty loss. According to IRS definition, a casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption. You were not able to use your car because of COVID, but the car was not destroyed.

Since you mentioned that you drive for a rideshare, the UBER website lists some information about business relief due to COVID which may be helpful to you.

@cliffbrou

cliffbrou · ‎February 24, 2021

Wow, you really missed the point on that one! COVID had nothing to do with the casualty loss! The only reason I mentioned it was that it made it possible not to need to rent a car. In this case, COVID was a help, not a hurt.

The casualty loss was that the car engine blew up, resulting in the immediate loss of use of the car and the substantial devaluation of the car by more than 50%. Is this not the same casualty loss as if it were in a severe accident?

Also, the IRS link in your response is broken.

Cynthiad66 · ‎February 24, 2021

No. Even under old laws this would be considered wear and tear and not a casualty.

First, the TCJA eliminates casualty loss deductions for 2018 through 2025, except for losses sustained in a federal disaster area. For these purposes, a federal disaster area is defined as one that has officially been declared as a disaster area by the president.

Generally, you may deduct casualty and theft losses relating to your home, household items, and vehicles on your federal income tax return if the loss is caused by a federally declared disaster declared by the President. You may not deduct casualty and theft losses covered by insurance, unless you file a timely claim for reimbursement and you reduce the loss by the amount of any reimbursement or expected reimbursement.

A casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption. A casualty doesn't include normal wear and tear or progressive deterioration.

See Link below for more information

Topic 515: Casualty Loss

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Reporting casualty loss, salvage sale and replacement of car used for work and personal

Deductions & credits

Deductions & credits

Deductions & credits