The aftermath of devastating natural disasters can leave behind hefty damage to the property of your business. Luckily, these damages can sometimes be tax deductible, allowing business owners in the Tulsa, OK, area who have been hit hard by Mother Nature to receive financial help from Uncle Sam.
What Is Not Covered
While plenty of storm-related damage can be written off during tax season, there are some blanket disqualifications. You typically cannot deduct these expenses:
• Natural wear and tear unrelated to any storm damage
• Minor damages
• Costs reimbursed by insurance
Additionally, failing to file a claim for property covered under insurance will disqualify a business from any deductions for damage done to that property. Contact your insurance agent immediately after the storm and fill out any required paperwork.
Calculating Damage for Each Property
In order to calculate the total amount you can claim to the IRS, you must first find the actual property loss of each item in question. This can be estimated by subtracting any salvage value after the event from the value of the property at the time of the storm damage, which will be less than what you paid for it. For example, a vehicle purchased at $30,000 may be worth only $5,000 by the time it is damaged in a disaster. If the damaged vehicle has a salvage value of $1,000, that would leave only $4,000 in casualty losses since some of the original $5,000 was offset with the new valuation. Subtract any additional payouts from insurance for the final amount.
If damage to your property is due to a presidentially declared disaster, you can file for a deduction in either the year of the disaster or the following year. If a business receives a payout at a greater monetary value than the worth of the property itself, the business may need to report a gain on the action when filing.
When hit hard by storm damage, tax deductions are probably the last thing on your mind. However, keeping track of expenses incurred with storm damage restoration services may allow you to save your business some money in April.