Total car loss in 2021. Do I need to claim anything on taxes? Car was used sometimes for freelance business so I have indicated business miles in the past.

[vdesign]

Confused if I need any documentation from insurance company for tax purposes about total car loss.

[Cynthiad66]

Yes.  You need insurance information to claim the deduction.  You must verify reimbursement amount and value of the damaged property.

After applying the $100 reductions, your total casualty loss for the year is reduced again by an amount that equals 10 percent of your adjusted gross income. The net result is the deduction you can claim on your tax return.

Claiming the deduction requires you to complete IRS Form 4684. However, if the casualty loss is not the result of a federally declared disaster, you must be itemize your deductions to claim the loss. Generally, you itemize deductions on Schedule A of your tax return if your itemized deductible expenses for the year exceed the standard deduction amount for your filing status.

About Casualty Loss Deduction

[vdesign]

Thank you for your quick response! What exactly is the information/forms that I need to request from insurance? I called them today, and they seemed pretty oblivious. Is it official letterhead or documentation establishing the amount of reimbursement and value of the car before the accident?

[Cynthiad66]

First, there is no allowable loss on Schedule A for personal property.   For tax years 2018 through 2025, if you are an individual, casualty or theft losses of personal-use property are deductible only if the loss is attributable to a federally declared disaster. Personal casualty and theft losses attributable to a federally declared disaster are subject to the $500 per casualty limitation." (from 4684 instructions).  Use this link:    4684 Instructions 

Now to address your concern, if they reimbursed you for the loss of your vehicle, you need the appraisal or whatever they used to determine how much they reimbursed you for the loss.  If you have an online account with your insurance company you should be able to download it there.  You had to file a Claim with the insurance company for them to be able to reimburse you,

A customer cannot deduct a personal loss on Schedule A if the
loss is not part of a federally declared disaster this year. ". 

@vdesign

[Edited 3/7/2022 8:40 PST]

[vdesign]

Hi Cynthia,

Thank you so much for your help! The whole total loss accident was stressful so this is very helpful information when I speak with the insurance company further tomorrow. To confirm, if they reimbursed me for the full value of the loss and waived the deductible, do I still need to mention anything of this total vehicle loss on my taxes? I don't think I'll be able to claim anything or get anything back since they've paid me in full. I think the only thing that wasn't covered was maybe the last full week of having a rental as they only cover up to 2 weeks.

[DaveF1006]

To clarify, have you claimed vehicle expenses with this vehicle in the past for your freelance business?

[vdesign]

Yes, I have an amount listed next to Car and truck expenses on Schedule C if that's what you're referring to.

[DaveF1006 · Accepted solution]

Yes, you will need to dispose of your business vehicle since it is no longer in service. After this is reported, there may be a gain or loss on the business portion of your vehicle.  Please follow these steps for an accurate reporting.

1. Navigate to the Business section of your return and first page is the Your 2021 self-employed work summary. Select review next to your business listed.
2. On the next page, scroll to expenses>vehicle>edit
3. Select your vehicle in the Vehicle summary. select edit
4. As you check the information in the next screen, you will need to check the box that says I stopped using this vehicle in 2021. Then enter the date that you stopped using it.
5. When you reach the page where it asks if you used this for personal use, you will say yes, and check one of the boxes that ask if you had another vehicle for personal use.
6. Then in mileage, you will indicate how much of that mileage was used for your business.
7. Then finish out the mileage section and continue until you get to a screen that says Do Any of These Apply to the XXX. If the percentage of your business use varied throughout years you used it, then you will check this box. 
8. If it asks if you converted this to non-business use, say no.
9. NOW it asks for the sales price.  Here you will put in the insurance reimbursement for the loss as a sales price. Before you record this amount, you will need to determine a business percentage of use throughout the years you have used this because Turbo Tax does not calculate this. So if you used the vehicle 50% of the time in say 2017, then you take the full mileage in 2017 and multiply it by the business percentage of use. You will do this for every year you used the vehicle for business. Once you have a total for all of the years, you will add this up and record the amount where it asks for the sales price.
10. Next you will record the cost of the vehicle when you purchased it. Use the same method of percentage use that I have mentioned above.
11. If you don't adjust your insurance reimbursement and cost basis by business percentage use, it will determine a full gain or loss on the vehicle and this would be incorrect. If it is a gain, your taxation on this will be much higher after the depreciation recapture takes place, which is described in the next step.
12. Continue until you get to the depreciation equivalent.  If you have claimed mileage then you will need to get the business mileage you claimed in previous years.  For each of the years, you need to multiply the mileage by the mileage equivalent for that year. The mileage equivalent table is in the learn more tab.
13. You will total up all the years you claimed business mileage and record that amount in Prior Depreciation Equivalent.
14. After listing these amounts,  the program will either report a gain or sale on the vehicle.

[vdesign]

Thank you so much! Super helpful!