Deductibles and Storm Damage: Can You Claim Losses as Deductions?
Can You Claim Losses As Deductions?
Storm damage can cause significant losses for a business. However, the answer to whether those losses are tax deductible or not depends on several factors, the biggest of which is whether items or potential claims are insured. There is a term, casualty loss, which refers to the sudden or unexpected loss of something due to an unusual or sudden event. These losses can be deducted; however, there are several stipulations which may prevent you from using this deduction.
1. Reimbursable Items
You likely cannot claim a casualty loss deduction for items that are considered reimbursable, meaning items that are already insured and protected from loss. Therefore, anything covered under your commercial policy cannot be used as a deduction.
2. Routine Use or Neglect
Also, claiming storm damage loss for items that were already beyond their expected life or not adequately maintained will likely not be accepted as a deduction. For example, claiming an HVAC unit, which has been on the fritz with no routine maintenance checks, has unexpectedly failed due to a storm is not likely to pass muster.
3. Business Interruption
A casualty loss deduction also cannot be applied to projected future profits, meaning that if a storm causes business interruption, you cannot claim a loss on those profits you expected during the shutdown. The reason is due to actual loss and predicted loss. Deductions work by proving actual losses, meaning proven losses. Projections of future income are not proof of that income.
4. Restoration Work
Additionally, a casualty loss deduction will likely not encompass the costs of restoration work unless the work is not covered by your business policy. You can contact your insurer or a disaster restoration specialist in the Cedar Creek,TX , area to find out more information on coverage and payment options.
Storm damage is an unfortunate occurrence, but one that your business is hopefully protected against through adequate insurance coverage. If not, you may be able to claim a casualty loss deduction, but you will want to review the list above to ensure your deduction claim can make it through scrutiny.