I did a voluntary return of a purchased vehicle (repossesion). The car was sold at auctiion and I have an outstanding balance.

[ekim308]

I am an independent contractor and use my car 97% for business.  The outstanding loan is not forgiven and I owe the balance.  Am I able to deduct this balance as a loss? Thanks.

[Vanessa A]

You may be able to deduct the balance of the loan, but it depends on a few things.

1) When you bought the car, did you take a full deduction for it since you use it for mostly business?

2) How much depreciation have you taken on the car?

You would walk through the steps in the business section >>vehicle expenses to report the disposal of your vehicle.  This will help you report the loss from the repossession. 

[ekim308]

bought new in January 2022. No depreciation taken, yet. Is it possible to take depreciation for the few months i had ownership and then take the loss on the balance?

[ShirlynW]

Yes, you can take depreciation for the time that you had the car.

It depends if you can take a loss on the balance. @Vanessa A advised you to walk through these steps.

1.  Business section > Vehicle Expense > Disposal of a vehicle.