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I had a car accident and received a insurance settlement on…

I had a car...

I had a car accident and received a insurance settlement on the car. My car was totaled. I need to know if this check is taxable on my 2017 return. Thank You.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

The check was for 6,035 and I do not believe there were withholding. I got no 1099 like from the bank. It was just a check. The repair exceeded the insurance on the car. They called and asked How about 6035. I said okay. There is not much else.Thanks

Accountant's Assistant: Is there anything else the Accountant should be aware of?

No Not really. I put the check in the bank. I talked to the Adjuster. He said The repair was for 500 more than the insurance on the car. I was rear ended and not hurt. The other guy got the ticket. Thanks .

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3/24/2018
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,759
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is***** will be assisting you. How was the payment structured. Was all of the settlement, or did you receive a portion for physical injuries?

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Customer reply replied 3 months ago
I received a check for the totaled car. Just one check. No injuries or structured settlement. Just a check I put it in the bank No injuries I heard nothing from the other guy
Customer reply replied 3 months ago
I cannot afford any more. Please use this internet like we are. Please. Please tell me if this goes on 1040 1099 Misc. Thank You.

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If you did not receive funds for physical injuries, and the check was just for the car, the amount received is not taxable. SEE BELOW:

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Car accident insurance settlements are generally not taxable, although there are certain exceptions, according to the Internal Revenue Service (IRS).

If you receive a settlement for personal physical injuries or physical sickness and did not take an itemized deduction for medical expenses related to the injury or sickness in prior years, the full amount is non-taxable. Do not include the settlement proceeds in your income.

However, there are instances where auto accident compensation is taxable. It depends on how your settlement is structured. The negotiation between you and the driver who injured you should include tax considerations so you can keep as much of your settlement as possible.

REFERENCE SOURCE:

https://www.insurance.com/auto-insurance/life-events/are-car-insurance-settlements-taxable.html

Now if the payment received, exceeded the FMV of the vehicle, then the excess amount is taxable.

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Customer reply replied 3 months ago
Do I have to declare this on state of Michigan income tax return? Schedule 1 additions and subtractions to income?

I will take a look at the Schedule 1 and get back to you shortly.

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Looking at the actual form and reading the instructions for the form, the answer is no, you do not have to report anything on the MI Schedule 1.

Schedule 1 instructions (Line by Line):

https://www.michigan.gov/documents/taxes/Schedule_1_Instructions_406977_7.pdf

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