Can I deduct the amount I had to pay auto rental company for damage to their vehicle by me in an accident?

[nsnilmani]

I was involved in a car accident in Dec 2015 in an rental car. Unfortunately, I did not had an insurance from rental company to be in the state of accident. So, all in all, I had to pay close to $6000 to the rental company in 2016 for vehicle damage. Can I deduct this amount from federal income tax? How do I go about doing that?

Thank You!!!

[Marketstar · Accepted solution]

Yes, to deduct a casualty or theft loss, you must itemize your deductions on Schedule A. The amount of your deduction is limited to the amount of the loss that exceeds 10% of your Adjusted Gross Income after a $100 deductible

As an example, if you had a $6,000 casualty loss, and your Adjusted Gross Income is $40,000, you would gain the following deduction:

After deducting $100, you are left with a $5,990 loss. Subtract $4,000 (10% of AGI) and you net a $1,990 deduction.

To report a Casualty or Theft loss -

• Click on Federal Taxes (Personal using Home and Business)
• Click on Deductions and Credits
• Click on I'll choose what I work on (if shown)
• Scroll down to Other Deductions and Credits
• On Casualties and Thefts, click on the start or update button

[woodtrust]

This answer was good in 2019 but now it appears the tax law has changed for 2020.  TurboTax has this explanation for 2020 changes under Casualty Losses:

"The casualty losses you can deduct are mainly limited to those caused by federally declared disasters. This includes hurricanes, floods, tornadoes, fires, and mudslides. If you experienced a loss that wasn't disaster-related, such as a theft, you can deduct this loss only to offset a gain from another casualty. This rule is an important change from prior years."