Bad things can happen to good business property. Fires, floods, freezes, and other disasters can damage or destroy the personal or real property you use to keep your business up and running.
Disasters are always bad news. But you may be able to deduct your losses. And you are not subject to many of the restrictions that apply to deductions for disaster losses to personal property such as your home, personal car, or personal belongings.
What Is a Business Disaster Loss?
A business disaster loss is damage, destruction, or loss of property used in a trade or business due to a “casualty.” For this reason, the terms “disaster loss” and “casualty loss” are often used interchangeably.
A casualty is a sudden, unexpected, and unusual event such as a fire, flood, freeze, earthquake, storm, hurricane, tornado, landslide, government-ordered demolition or relocation, or terrorist attack.
Events that would not be classified as “disasters” can also be casualties. For example, a car accident qualifies as a casualty so long as it’s not caused by your willful act or willful negligence. Losses due to thefts and vandalism can also qualify.
Unlike the individual’s loss deduction, the business does not need a presidentially declared disaster to claim a tax deduction for its loss to business property. As explained in Deducting Disaster Losses for Individuals, for tax years 2018-2025, the individual taxpayer may deduct a casualty loss only if it’s due to a presidentially declared disaster.
For example, you can deduct business property losses from a localized, accidental fire in an office building. But personal property losses due to a fire in your home are deductible only if the fire is declared a federal disaster—something certainly not likely for a small house fire.
Calculating a Business Disaster Loss
The casualty loss deduction permits you to deduct an amount equal to the decline in the property’s value due to a casualty, up to the amount of your ... Log in to view full article.