Disaster Losses and Gains for Business or Employee Property

I have business property that was destroyed in a disaster. Is the tax loss calculated the same way for business property as for personal use property?

To calculate the amount of disaster loss from business property, take the lesser of the adjusted basis of the property or the decrease in fair market value due to the disaster and subtract any insurance or other reimbursement that has been received or is expected. Business disaster losses are not subject to the $100 or the 10% adjusted gross income reductions that apply to individuals.

Can a business elect to claim a disaster loss in the prior year?

Yes. Businesses, like individuals, may elect to deduct disaster losses in the prior year by filing an amended return.

What about gain from the receipt of insurance proceeds in excess of the adjusted basis of business property destroyed in a disaster? Is that calculated the same way as with respect to personal use property?

If business property is destroyed and the insurance payments exceed the adjusted basis, there is a gain for tax purposes. The business may elect to postpone the gain by buying replacement property with a cost equal to or more than the insurance payments for business use within two years of the end of the tax year in which the gain was realized.

I was required to purchase special uniforms for work and they were destroyed. Are there any special rules for deducting their loss on my taxes?

The loss of property you used as an employee should be included in your “miscellaneous itemized deductions,” which are deductible if you itemize deductions to the extent they exceed 2% of your adjusted gross income.

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