A casualty loss is the loss of property due to natural disasters, accidents, or deliberate illegal acts. Both individuals and businesses can claim it on their tax returns if it meets deduction requirements. Smart Asset explains that casualty loss definitions and requirements vary by country.
A casualty loss involves the loss of property through an unanticipated set of circumstances. In many cases, there is a loss of casualties due to some type of natural disaster. In other situations, a casualty loss occurs as a result of some type of accident. Both individuals and businesses can claim a casualty loss on their annual tax returns, if the circumstances surrounding the loss meet the deduction requirements.
One of the most common reasons for claiming a casualty loss is the result of some type of natural disaster. Property, such as buildings, vehicles, farmland, and other physical assets that are used as part of operating a for-profit business, may be partially damaged or completely destroyed. Almost any type of natural phenomenon can be involved in claiming a casualty loss. Floods, tornadoes and hurricanes, lightning storms or earthquakes could set the stage for the destruction of property and the proper claim of a casualty loss.
Along with natural disasters, a loss of life can also result from some type of accident and even from a deliberate illegal act. Vehicles that are used for business purposes and are damaged during normal and standard use can be claimed as accident losses. In the event that a commercial vehicle is stolen and then totaled in an accident, it may also qualify for designation as a casualty loss.
Fires at commercial premises often qualify as a casualty loss as well. In the event that a company-related plant, business office or other facility is the victim of arson or destroyed by fire due to an unforeseen problem, the company may be allowed to deduct the value of the facility as a casualty loss for the current calendar year.
While various nations recognize the concept of casualty loss, the exact definition of what constitutes this type of financial loss can vary from country to country. National revenue agencies generally provide information on recognizing a casualty loss, as well as specific forms that must be used to claim a casualty loss.
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