Let me make this really clear up front: We are not tax professionals!
We do not give tax advice. We are simply pointing you to information to aid in your research when filing your taxes after taking a loss in value after an auto accident.
Did you know that casualty losses are deductible from your income taxes?
In Topic 515 on the IRS’s website, it discusses the types of losses that can be claimed on your income tax. Diminished value is specifically listed!
They call it the “decrease in the fair market value”, and you can report this loss to save on your taxes. The decrease can be determined by obtaining an appraisal by a qualified company or individual (ahem, like us!), and it can be significant.
Sometimes, depending on the situation, even the cost of repair can be utilized to further realize tax savings.
There are special rules about taxes that I am not qualified to advise upon, but simply asking your tax professional or doing some diligent research should prove very worthwhile. Most of the time, an individual can find the help they need on the official IRS website.
Evaluate your loss carefully.
Make sure you realize that the first $100.00 of a property loss cannot be deducted from your taxes and the total loss on property must be more than 10% of your adjusted gross income.
For example, if you have an adjustable gross income of $50,000 per year, you would have to have a loss of at least $5101 to get even $1.00 deducted from your tax liability or “taxes owed”.
Keep in mind that this information is not tax advice, just a re-statement of the rules freely available on the IRS website. You should contact a qualified tax professional if you are having trouble figuring out how to calculate your deduction.
In addition, not just any appraisal will work; any appraisal you obtain will be held to strict standards by the IRS. The method of calculation, competency and knowledge of your appraiser will be evaluated. Make sure you get an adjuster or appraiser that knows what they are doing and is properly qualified (like us!). We use the USPAP methodology, which is easily found on at uspap.org – check out sections 7 & 8!
Also, although it seems like common sense, keep in mind that any payment you receive for loss of market value or diminished value cannot be claimed as a tax liability deduction.
Small losses in market value are generally not going to reduce your tax liability unless you have no income.
If you think you may qualify for tax benefits, be sure to consult a tax professional to help you get your loss properly deducted. If you need an appraisal to prove your loss, make sure to contact us!
Fill out the form below to get a FREE claim consultation to ask questions about your diminished value claim today!
Good luck! Sometimes it’s just in the Petty Details!