How to Deduct a Car Accident From Your Taxes
- Part 1 of 2: What can I deduct from my taxes?
- Part 2 of 2: How do I deduct car accident damage from my taxes?
Getting into a car accident - even a minor one - can be a big hassle. Not only do you have to deal with the emotional (and potentially physical) trauma of the crash, but you also have to handle having your car repaired, and filing an insurance claim. And, to top it all off, you’ll likely have to pay money to cover your deductible, and potentially even more money if the accident eclipses what your car insurance covers.
Naturally, if you end up having to spend money due to a car accident, you’ll undoubtedly want to get some of it back. That may seem like asking for the impossible, but it’s not! You can actually get some of the money that you’ve lost in a car accident back, by deducting the accident from your taxes come tax season. You may not be able to undo all of the emotional and physical damage of the accident, but getting some of your money back is a big start. In this article, Part 1 explains what you can deduct from your taxes, and Part 2 tells you what forms you need to complete.
Part 1 of 2: What can I deduct from my taxes?
There are two types of damage caused by a car accident: personal injury (physical damage caused to you), and property damage (damage to your property, usually your car). Either type of damage, caused by a car accident, can potentially be deducted from your taxes.
However, you can only deduct money that you actually had to pay. For instance, if an accident resulted in $40,000 worth of damage, and your insurance company covered $35,000, then you will only be able to deduct up to $5,000.
Furthermore, you cannot deduct money from damage due to a car accident if you did not file an insurance claim after the accident. You also are only legally allowed to deduct money for damages that were not caused due to your own negligence, or a willful act (or a driver in your vehicle that was negligent, or committing a willful act).
Part 2 of 2: How do I deduct car accident damage from my taxes?
To deduct money lost due to a car accident, you will need to fill out a Form 4684. The property losses will be deducted through Form 4684, and both the property losses and medical expenses will have to be listed on Schedule A of Form 1040.
It’s worth noting that your medical deductions are all grouped together. In other words, the medical expenses that are the result of a car accident are treated the same as any other medical expenses that you incurred throughout the year. Physical damage as the result of a car accident is not deducted differently, and is subject to the income-based limit that you can deduct for medical expenses.
When filing your taxes and deducting money from car accident damage, you won’t need to file any claims or documentation proving the accident occurred, or the fiscal damage is accurate. However, if you are audited, you will need to provide that information, so you should keep both your insurance claim, and all damage documentation.
Deducting money from damage caused in a car accident is relatively easy. By doing so, you can get some of your money back, and limit the total damage and hassle caused by the collision.