Can I Claim Commercial Property Losses on My Taxes?

4/16/2022 (Permalink)

Commercial storm damage in Acequia, CO.

Can I deduct Losses from Commercial Property On My Taxes?

Unexpected commercial property losses have the potential to be devastating financially, mentally and time-wise. They can massively derail operations and cause a great deal of hassle. Even if you have coverage, it can be a big headache to deal with the insurance adjusters, filling out paperwork, contacting a professional cleanup and restoration service in Acequia, CO, and/or handling anything else that needs to be done in the wake of an incident resulting in one. One thing you may be glad to know is that storm damage, fire damage and other business-related losses are tax-deductible regardless of whether they are in a federally declared disaster area or not.

Casualty Losses

These include damage, loss or destruction arising from any kind of unexpected or sudden incident like a natural disaster (storm damage, smoke damage and etcetera). Normal wear and tear or time-related deterioration are not casualty losses. The three kinds (labeled as federally declared disasters) are:

• Qualified disaster losses
  
• Federal casualty losses
  
• Disaster losses
  
  

Since it involves income-producing property, your loss amount is the adjusted basis of said structure/possession (your cost, with deductions and additions for things like depreciation or renovations).

Theft Losses

If someone steals from your business, the theft loss is also the adjusted basis. If it is due to a Ponzi scheme, the rules may be slightly different.

Tax Claims Facts

Any expected or received payout from insurance companies or salvage value lowers your loss amount. You must prove any loss you claim, so detailed documentation is important. You also run the risk of acquiring capital gain if you end up with insurance reimbursement that is higher than your adjusted basis.

Storm damage and other forms of harm to your enterprise's property from events like hurricanes are tax-deductible. Theft is as well. It pays to be careful when claiming them on tax forms, especially if you do not know how much your indemnity policy will pay out as it can lead to you owing taxes on a gain instead of gaining a deduction for a loss.