Taxable Talk

On Monday, February 23rd it was raining as I left for the gym. As I got to the gym, the road felt funny–slicker than in a normal rain. I realized that it was snowing. Now, our “blizzard” wasn’t crippling or anything like what people back east have gone through this winter, but it did inspire one of the best pictures I’ve seen this year:

This came up because of a question I received from a reader on casualty losses:

Our business had a fire in 2014. We recently received a settlement from our insurance company for $225,000. We had estimated the amount of damages as $175,000, but the insurance company also paid us for relocation costs, and some other things, too. Can we claim a casualty loss on our tax return?

To claim a casualty loss, you need a casualty–an unexpected event that caused damage. You had that. You also must have suffered a financial loss. A fundamental rule of US taxation is you can only deduct things you pay for; a corollary is you can only take a loss on losses you incur. Here, you didn’t suffer a loss. You had excellent insurance coverage and there was no doubt you and your insurance agent did an excellent job. You did not suffer a financial loss as your losses were reimbursed. Thus, there’s no deductible casualty loss.

My reader has rebuilt. I’m happy to say Las Vegas has fully recovered from our blizzard, too.

Tags: casualty.losses

This entry was posted on Sunday, March 8th, 2015 at 8:18 pm and is filed under IRS. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.