Are Accident Costs Tax Deductible?

A car accident can happen to anyone – a moment of inattention or a chain of unfavorable circumstances are enough. Even if physical damage is avoided, it is not a pleasant situation and brings many problems with it. Sometimes the possibility of deducting the incurred costs from taxes can be a compensation. In this article, we explain when and how this is possible – welcome.

Accident costs as business expenses

Expenses related to earning income include all costs associated with work. These include expenses that serve to earn, secure, and maintain income. For instance, these costs include arising from commuting to work – regardless of whether one drives their car or uses public transport. Different types of work clothing, tools, or electronic devices used for work can also be counted among them. Such expenses can be deducted as business expenses from taxes – in Germany, this relief is automatically granted in the form of a flat rate of 1200 euros.

However, it is possible to attempt to claim a higher deduction by proving expenses above the legally stipulated amount. If an accident occurs on the way to work, the associated costs can be deducted from taxes as income-related expenses – the required conditions will be presented later in the article.

Deduction of accident costs as income-related expenses – who is entitled to it?

When can accident costs be declared as business expenses in the German tax return? Two basic conditions must be met.

Firstly, the deduction of accident costs is only possible if the affected person bears the costs themselves. If everything is covered by insurance, this possibility does not exist. If the event is not the fault of the affected person, the insurance company of the other party involved must cover the repair and other expenses. This includes costs for towing or scrapping the car, renting a replacement vehicle, reimbursement for lost working hours, or damage to equipment as a result of the event. A situation may also arise where the person who caused the accident is not insured and cannot cover the costs.

However, if one is fully or partially responsible for the accident, their own insurance may not cover all the costs, meaning many things have to be paid out of pocket.

The second condition is that the deduction of accident costs as business expenses is only possible if the event occurred on the way to work or during a business trip.

If both conditions are met, accident costs can be claimed as business expenses in the tax return.

Deduction of accident costs as special expenses

Sometimes it is possible to claim car accident costs for tax purposes, even if they did not occur on the way to work. They are then treated as special expenses or extraordinary burdens – this applies to accidents in various situations, such as visiting a lawyer during a divorce or transporting a disabled person.

Which accident costs are tax-deductible?

Basically, costs that are not covered by insurance or reimbursed from another source can be deducted.

Checklist of deductible accident costs:

• Repair costs (even if it’s a borrowed vehicle),
• all legal and court costs,
• expenses for renting a replacement vehicle or using other means of transport for work,
• travel costs to the workshop, lawyer, or court,
• expenses for calls and correspondence related to the accident,
• expenses for the repair or purchase of work equipment.

Deduction of accident costs – how to prove the expenses?

In case of an accident, practically all documents relating to the event are needed. Firstly, it is advisable to keep all accident documents – police report, witness statements, or photos. This helps to prove that the accident indeed occurred and happened during a business trip or on the way to work.

For tax purposes, documentation of the incurred accident costs that are being claimed for reimbursement is, of course, also required – primarily receipts, invoices, and all insurance payouts.

In short – it’s good to be prepared for all possible questions and to be able to present written evidence. In many cases, some documents are sufficient, in others, officials may require a detailed account of the situation. With the required evidence, all deductible costs can be deducted from taxes.

Deducting accident costs for tax purposes – settle with Taxando

The tax return in Germany, taking into account accident costs on the way to work, can be most easily submitted with Taxando. Our accounting app is extremely easy to use and offers all necessary options – you will receive professional support to turn the unpleasant event into a tax advantage. Try the app today, purchase the PREMIUM package, and complete your tax return in a few minutes, including the reliefs and deductions you are entitled to – welcome.