How Can I Deduct Storm Damages For My Business?
If your business in College Station, TX has sustained severe storm damage and your insurance policy doesn’t include coverage for storms or floods, you will need to pay the expenses out of pocket. It may be possible, however, for you to claim a deduction on your income taxes to cover some of the expenses.
Business Casualty and Theft Loss Deduction
There are some rules you will need to follow in order to take a deduction for your business losses. The losses are grouped into two categories: casualty losses and theft losses.
These losses would include the damages of business property due to one of the following events:
- It is an unusual circumstance.
- The event was unexpected and was not intentionally triggered.
- It was a sudden and fast-moving situation.
If someone has stolen money or property from your business unlawfully, your loss may be tax deductible. Losses can include such crimes as robbery, burglary or blackmail.
In order to take the casualty and theft loss deduction, you will need to provide proof of the event. You have to explain such things as:
- Details about the casualty, including the date it occurred
- Documentation showing the value of your property before and after the event
- Proof that you own or lease the building
- Any insurance reimbursement
How to Figure the Deduction
You should consult with your tax accountant, but a general rule of thumb is:
- If the property is totally destroyed, you must figure out the price the property was worth at the time of destruction, taking into consideration any improvements made and any depreciation. From this, you should subtract the salvage value of the property as well as any insurance reimbursements.
- For property that hasn’t been completely ruined, you should evaluate the fair market value (FMV) of the property before and after the event. Annual appraisals typically show the FMV.
If your business insurance doesn't cover storm damage, discuss your tax options with your accountant right away.