Does your business have property that has been damaged recently by a natural disaster or vandalism? You don’t have to wait until your company fields its 2020 tax return to obtain tax relief.
Amend your company’s 2019 tax return. Under a special tax code provision you can elect to claim a casualty loss for business property in the tax year before the casualty occurred.
As with casualty loss deductions for personal property, the business property must be located in a federal disaster area to qualify for this election. However, there are no special tax law limits on the deduction amount for business property.
Prior to the Tac Cuts and Jobs Act (TCJA), you could claim losses for either personal or business property for damage that was “sudden, unexpected or unusual.” But the deduction for personal property loss (minus insurance proceeds) was limited to the excess loss above 10% of your adjusted gross income (AGI) after subtracting $100 for each casualty or theft event. In contrast, unreimbursed business property losses were deductible in full.
The TCJA suspends the deduction for personal property losses for 2018 through 2025 except for losses in an area officially declared as a federal disaster area. However, business owners can continue to deduct losses without any limitation.
To speed up recovery of a tax refund, a business owner may make a special election. Normally, you can only claim a casualty loss deduction in the tax year if it suits your needs.
For example, if you own a store in a designated downtown area that was ransacked in June and you’ve already filed your 2019 return, you can amend the return. Or, if you have received a filing extension to October 15, you can claim the loss on your initial 2019 return.
The election is also available to individuals suffering losses in a federal disaster area.
Small Business Tax Strategies