A natural disaster is always bad news for a Maine-based small business, but sometimes a tax break can be salvaged.
A hurricane, earthquake, tornado, fire, flood, or storm usually means that business owners can claim a casualty loss deduction on their tax returns. Usually, vehicle collisions or thefts also qualify for the tax break. Remember, however, that no deduction is allowed for damage caused gradually, such as with termites or drought.
Depending on the region that the business is located in, it may be possible to file an amended tax return, instead of waiting for the next time a tax return is filed. This is true if the region is a “presidentially-declared disaster area,” resulting in a quicker tax refund.
It’s important to note that there are some limitations on personal casualty loss deductions, like the first $100 of a casualty loss cannot be deducted, and the fact that casualty losses cannot be written off unless they exceed 10 percent of the adjusted gross income of the person filing.
The good thing is that there are no such limitations for businesses or income-producing property such as rental real estate.
It’s critical to provide proof of the losses. Business owners should keep copies of newspaper clippings and police reports, and take before and after picture and videos of the disaster, if possible. It may also be necessary to get an independent appraisal from a real estate expert, depending on the type of business and the losses being deducted.
To learn more about qualifying for tax relief in the event of casualty loss from natural disaster, fire, theft, or auto collision, call Filler & Associates.