I received a payment for hail damage on my business vehicle but did not repair the vehicle. How is this money accounted for? Is it income or does it just lower the basis of the vehicle?
You'll need to sign in or create an account to connect with an expert.
It lowers the basis of the vehicle.
How this should be handled in TurboTax depends on what you did with the vehicle and how much basis was left on the vehicle before the insurance payout.
In TurboTax:
If the payout was less than the remaining basis, adjust the remaining basis to accommodate the payout amount.
The easiest way to enter this when using TurboTax would be to convert the vehicle to "personal use" to get it off the books. Next, enter same vehicle with the new adjusted basis. Report that it had the same "placed in service date" so the asset life remaining will be correct, and report prior depreciation as the amount of depreciation you took.
If the payout was more than the remaining basis, you will have depreciation recapture. Depreciation Recapture is reported and taxed as Ordinary (personal) Income.
The easiest way to enter this when using TurboTax would be to report that it was sold for the amount of the insurance payout. Again, reenter the vehicle in order to claim other related expenses, and use zero as the basis.
"If you have a casualty or theft loss, you must decrease
your basis in the property by any insurance or other reimbursement you receive and by any deductible loss. The
result is your adjusted basis in the property."
"Depreciable property. If the damaged or stolen property was depreciable property held more than 1 year, you
may have to treat all or part of the gain as ordinary income
to the extent of depreciation allowed or allowable. You figure the ordinary income part of the gain in Part III of Form
4797. See Depreciation Recapture in chapter 3 of Pub.
544 for more information about the recapture rule."
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post
Ask questions and learn more about your taxes and finances.
lmaddin
Level 1
eileenboone
New Member
JulieJ5
New Member
jakeem-wynn
New Member
okiedokie
New Member