How do I claim a business vehicle that was totaled in an accident?

[deceac]

I am getting an error on line 25 (Trade in Business depreciation).  I do not know what to put in A.  I did not trade in the vehicle. It was totaled in an accident.

[NancyG · Accepted solution]

You will show it as disposed of.  If you received insurance proceeds, the amount received will be your "sales" amount. Did you purchase a new vehicle to replace it? If so, the new vehicle will be the one you "traded" for the old. 

[jnabber]

So should this transaction be listed as a trade-in in turbo tax if I purchased a new vehicle a week later?

[sdchasse]

Would love to know the answer to this too.  I am in the same place and am not sure how to do this.

[sdchasse]

Actually my vehicle was used for some business and some personal.  Does this make a difference?

[roy4]

This answer conflicts with answers to similar questions.  Some Turbo Tax experts say you can not count the new vehicle as a trade in.

[Grimes_MG]

What about if you still had a loan balance on the car that was totaled? My car was deemed "totaled" and I received a settlement from the party-at-fault's insurance company. I took the settlement and payed the remaining loan amount which left me a little less than 1/4 of the total settle amount. I then took that 1/4 and bought a used car for my business. How do I report that ?

It seems that TT is taking the entire insurance payout as income. Do I only report the 1/4 amount since I didn't realize the entire payoff b/c I owed money to the bank?

[Critter-3]

The loan balance is immaterial on an income tax return which is why you are not prompted for that information. 

You sold the car to the insurance company   and bought another car ... just that simple.  Trading in a vehicle is no longer reported on an income tax return starting with 2018.  

The cost of the vehicle becomes the basis for depreciation and you can only deduct the business portion. Work thru the sale in the vehicle expenses section slowly and let the program do the work for you.  If you need more guidance then either upgrade to the LIVE option  or  call TT support.  

[Carl]

you can not count the new vehicle as a trade in.

That is correct in the case of an insurance payout. The bottom line is, you sold the vehicle to the insurance company. What you used the proceeds for after the "sale" has no bearing on anything.

The percentage of the payout equal to the business use of the vehicle is reported as business income. If there's a gain (which I seriously doubt) then it's taxable business income.

[rossi1162]

The insurance company did not pay until January of 2026. The accident was December 23, 2025. Do I take the loss on my 2025 Tax return, or do I do this later and file it with the 2026 1120 forms?

[RogerD1]

Since the loss of the vehicle occurred in 2025 through an "involuntary conversion", the loss on the business portion used of the vehicle will get reported on your 2025 taxes.  Since the proceeds occurred in 2026, the amount of the proceeds for the business use portion of the vehicle would get reported as income in 2026.

If you had your vehicle information input in TurboTax for prior years, TurboTax will be able to determine the amount of loss that you had.  If using TurboTax Desktop for Home and Business, on the screen for the vehicle that was totaled, you would report that you stopped using the vehicle in 2025 and several screens later you could input the Sales Price as 0 since it was totaled.

For your 2026 return, you will report the insurance proceeds portioned to the business use as Miscellaneous income/Other reportable income.

[rossi1162]

Thank you for your answer. But I have a follow-up.

How do I show this vehicle as disposed of in Turbo Tax? If I delete the asset from the depreciation form, will Turbo Tax follow up with the appropriate questions and forms?

[PatriciaV]

To remove the vehicle from TurboTax, you need to indicate that you "stopped using it for business," per the article below. Follow RogerD1's instructions on reporting any insurance payments.

How do I enter the sale of a vehicle used for a business or rental property?

[Mezaaraceli14]

Hi, can you please clarify. My car was totaled I owed $11,000 insurance only paid $10,000 & sent the check directly to the Bank to go towards my car loan & GAP covered the remaining. 

Also, I did purchase another car obviously but no money from insurance company was applied as a down payment because of course I didn't receive anything.

Also, after my previous car was wrecked, I no longer am doing doordash so I stopped in July of 2025. 

Sorry for the long message anything helps. 

[Vanessa A]

The amount you still owed has no affect on how things are reported.  The GAP insurance is also not part of the calculation. 

 The three numbers you need are:

1. your cost basis,
2. the amount you sold it for which in this case is what the insurance company paid you and, 
3.  percent of business usage

Your cost basis is what you paid times the percentage of business use of the car minus depreciation.  So if you bought the car in 2023 and took the full depreciation in the first year, then your cost basis is $0 and your selling price is $10,000 IF the car was 100% used for business.  This would give you a gain on the sale of $10,000.  If the car was 50% used for business, then you would have a $5,000 gain on the disposition of the vehicle that would be reported on your Schedule C.  

When you first enter your business info, you will be asked if any of these apply, one option will be did you start or stop doing this business in 2025?  Here you can select yes, I stopped doing Door Dash in 2025. 

If you used standard mileage deduction in previous years on this vehicle, you would depreciate your vehicle using the cents per mile allocated to depreciation based on the year. You can find this on your previous year Schedule C worksheets. 

The portion of the business standard mileage rate treated as depreciation is:

27 center per mile for 2020 

26 cents per mile for 2021 & 2022

28 cents per mile for 2023

 30 cents per mile for 2024

 33 cents per mile for 2025
 

If you used actual expenses, then you would look at your forms from last year to see your total depreciation taken on the vehicle. You will find this on the depreciation worksheet. If you took an accelerated depreciation method 


The new car also does not have an affect on your situation with reporting the disposal of your wrecked car.

To enter the disposition of a business asset take the following steps:

1.  go to the Self-Employment section and select edit next to your vehicle. 
2. Go through the steps and check the box that says I stopped using this vehicle in 2025
3. You will need to say you sold this vehicle
4. When you are asked for the sales price enter any insurance payouts you received. 
5. Continue through answering the questions so that the property and any payouts can be properly allocated