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My car got hit at Lowes store. A hit and run.
My insurance offer repair or a check.
Someone told me if I take the check the insurance run it through the IRS if it's more $1000.00 and the IRS take a chunk and I get the rest.
Is this true ???????
The quick answer is, no, this is not true, and the money won't be taxable.
There are however a few twists that you likely don't need to worry about. If your car has been a deductible expense on your taxes because you use it for a business, there are some tax implications. Also, if for some crazy reason, you are able to sell the car for more than the amount you paid for it plus the insurance money (so you sold it for a profit), you may be subject to capital gains tax on the sale.
Not applicable to your case, if there was a settlement for lost wages, "pain and suffering" and other non direct costs (direct costs would be cost to repair the car, rental car, medical expenses, and such) those may be taxable as well.
Sometimes, you can take the check and live with the damage, or find a way to repair it yourself or at a lower cost and put some of the money towards other expenses that are not covered. Technically, if you use the money for anything unrelated to the accident, or to compensate yourself for your time, it would be taxable. It woudl surprise me if anyone ever claimed that income, but technically they would be required to do so.
My car got hit at Lowes store. A hit and run.
My insurance offer repair or a check.
Someone told me if I take the check the insurance run it through the IRS if it's more $1000.00 and the IRS take a chunk and I get the rest.
Is this true ???????
You might review this statement from the IRS. If you scroll down to the section on "loss in value in property" I think it answers your question.
The simple answer is the money is not treated as income and not taxable. The exception would be if you received so much in settlement that it would have left you--moneywise--in a better position than you were before the accident took place. Where so little money is at stake ($1000) I cannot imagine you having a tax issue in this situation.
Sometimes, you can take the check and live with the damage, or find a way to repair it yourself or at a lower cost and put some of the money towards other expenses that are not covered. Technically, if you use the money for anything unrelated to the accident, or to compensate yourself for your time, it would be taxable. It woudl surprise me if anyone ever claimed that income, but technically they would be required to do so.
I don't believe this is correct. For full disclosure, I'm not an accountant, a tax lawyer, or anything that makes my statements more qualified than any layman reading the tax code.
However, from my reading of 3 different IRS publications, the IRS only dictates that you report insurance money from a casualty money as a gain if it exceeds your basis in the property. Since insurance companies will total a vehicle if the damage is more than the vehicle is worth, this almost never happens for a car (an exception would be a collectable car that increases in value over time). This may happen for houses and other properties that do increase in value over time, but not your every day car.
If you don't make a profit, you don't pay tax.
Here is a quote from insure.com that obviously agrees with my interpretation of the IRS code.
"If you bought a car for $20,000 and it is smashed up and the insurance company gives you $15,000, there should be no tax in that situation," Davis explains. Whether or not choose you restore the damaged car does not affect a taxable gain.
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