J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

18.7 Deducting Damage to Your Car

Damage to your car in an accident may be a deductible casualty loss unless caused by your willful conduct, such as drunken driving.

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Filing Tip

Auto Damage

Unreimbursed accident damage may be a deductible casualty loss.

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You may not deduct legal fees and costs of a court action for damages or money paid for damages to another’s property because of your negligence while driving for commuting or other personal purposes. But if at the time of the accident you were using your car on business, you may deduct as a business loss a payment of damages to the other party’s car. For purposes of a business loss deduction, driving between two locations of the same business is considered business driving but driving between locations of two separate businesses is considered personal driving. Therefore, the payment of damages arising from an accident while driving between two separate businesses is not deductible as a business expense.

A court has allowed casualty deductions for damage resulting from a child starting a car and from flying stones while driving over a temporary road. In a private letter ruling, the IRS disallowed a loss for damage to a race car by an amateur racer on the ground that in races, crashes are not an unusual event and so do not constitute a casualty.

If the deduction is questioned, be prepared ...