October 17, 2014 | Deductions
Claiming a casualty loss for damage to personal property can be difficult, as the tax law limits any deductions in two ways:
- The first $100 of any casualty cannot be deducted.
- You can only write off casualty losses when the total amount in one year (minus the $100 per casualty amount) exceeds 10 percent of your adjusted gross income (AGI).
There are, however, no limits on losses for business property or income-producing property such as rental real estate. This means you can write off business losses without applying the 10 percent limit or the $100 per casualty amount applied to personal losses.
And there is a way to get a business deduction when you have a car accident with a vehicle that is used personally.
Suppose your spouse has an auto accident in your personal car. If your annual AGI is $100,000 and the loss is $3,000, there is no deduction because of the 10 percent limit. If the car is normally used for business driving, however, you can salvage a casualty loss deduction.
After the car comes back from the shop, begin using it as a business vehicle. If your business use of the car then comes to, say, 80 percent of its total use, you can now deduct $2,400 (80 percent of $3,000) on your tax return.
It doesn’t matter that you started using the car after the accident for business. You can still get a deduction by prorating the time the car is used for business purposes.
Be sure to document business driving use to back up your claims, and talk with Filler & Associates for more information about deductions.