Claim Casualty Loss Deductions for Rioting Damage at Your Business
- Learn the definition of “casualty.”
- Discover which casualty losses may apply to you.
- Find out what types of records you’ll need to prove casualty losses for insurance and tax purposes.
The recent riots around the country have resulted in the destruction of many storefronts, office buildings and business properties. In the case of stores or other businesses with inventory, some of these businesses lost products after looters ransacked their property. Businesses saw windows smashed, property vandalized, and some buildings burned to the ground. This damage was especially devastating because businesses were reopening after the COVID-19 pandemic eased.
A commercial insurance property policy should generally cover some, or all, of the losses. (You may also have a business interruption policy that covers losses for the time you need to close or limit hours due to rioting and vandalism.) But a business may also be able to claim casualty property loss or theft deductions on its tax return. Your Fiducial representative can walk you through the specifics of your situation. For now, here’s how a loss is figured, generally, for tax purposes:
Your adjusted basis in the property
MINUS
Any salvage value
MINUS
Any insurance or other reimbursement you receive (or expect to receive).
Casualty losses that qualify
We call the damage, destruction or loss of property resulting from an identifiable event that occurs suddenly, unexpectedly or unusually a casualty. It includes natural disasters, such as hurricanes and earthquakes, and man-made events, such as vandalism and terrorist attacks. It does not include events that are gradual or progressive, such as a drought.
For insurance and tax purposes, it’s important to have proof of losses. You’ll need to provide information including a description, the cost or adjusted basis as well as the fair market value before and after the casualty. It’s a good time to gather documentation of any losses including receipts, photos, videos, sales records and police reports.
Finally, be aware that the tax code imposes limits on casualty loss deductions for personal property that are not imposed on business property. For more information regarding your situation, call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations. Ready to book an appointment now? Click here. Know someone who might need our services? We love referrals!
For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.
