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A natural disaster or other casualty can be bad news for your business, but you might be able to salvage a tax break.
Taxpayers can claim a casualty loss deduction on their tax returns if they've suffered a "sudden, unexpected or unusual" event — including a hurricane, earthquake, tornado, fire, flood, or storm. Auto collisions and thefts can also qualify.
(However, no deduction is allowed for damage caused by gradual deterioration, such as destruction caused by termites or drought.)
If your region is officially designated as a "presidentially-declared disaster area," you don't even have to wait until you file your next tax return. You may be able to file an amended return and get a quick tax refund for fast financial relief.
There are some limitations on casualty loss deductions for personal assets (as opposed to business or investment assets):
1. You can’t deduct the first $100 of any casualty loss.
2. You can only write off casualty losses when the total amount for the year exceeds 10 percent of your adjusted gross income.
But there are no such limitations for businesses or income-producing property such as rental real estate.
You’ll need proof, though: Keep copies of newspaper clippings and police reports. Take "after" photos or videos of the disaster ("before" photos help too). You may also need an independent appraisal from a real estate expert.
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If you suffer a casualty loss after a natural disaster, fire, theft or auto collision, contact our firm to see if you qualify for tax relief. |
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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