Hurricane Katrina has left a wide and long path of destruction. Besides the human toll, businesses on the Gulf Coast have taken a beating. If yours is one, here is how you can write off casualty losses on your taxes. Casualty Losses - Katrina If your business suffered losses because of Hurricane Katrina, you can at least write-off much of the loss. In doing so, you may be able to get a refund of taxes paid earlier in the year. Tax law allows businesses to write-off business property that is damaged or destroyed because of a storm. To claim the deduction, you must show the following: 1. A specific casualty occurred and when it occurred, 2. The casualty was the direct cause of Katrina, and 3. You are the owner of the property. In the case of Katrina, this shouldn't be difficult to do. Take pictures of anything that is a loss and try to compile a list of everything destroyed or damaged. Obviously, this should occur after taking care of your personal situation. Importantly, business owners should make sure they claim everything damaged. With the horrific flooding, damaged property may include not only products but also anything that rusts. If your business location is under water, make sure you investigate the impact on the property itself. Theft Losses - Katrina With the federal governments delay in rescue operations, your business may have suffered losses related to theft. New Orleans, in particular, seems to have suffered an outbreak of theft problems. While I can understand a person taking water and food, I must admit I have little empathy for people stealing television sets. For business owners, the distinction is irrelevant. To claim a theft loss for your business, you must show: 1. When the property went missing, 2. A theft took place pursuant to your state law, and 3. You were the owner of the property. The inevitable question that will arise for business owners is, "How do I know what was stolen versus destroyed?" Technicalities aside, you should claim losses as casualties unless you have specific proof and a police report related to a theft. I seriously doubt the IRS is going to give you much trouble. If it does, a judge will laugh the IRS out of the courtroom. Insurance Proceeds If you receive insurance proceeds for your casualty losses, you must apply the proceeds amount to the loss you are claiming. Sorry, but not double dipping is allowed. In Closing First and foremost, get your family and personal situation in order. Your business can wait and you will have options once you get to it. |
