27 Nov Truck Tax: Understanding Casualty Financial Loss
A casualty financial loss doesn’t have to be a terrible thing, not even for truckers, as long as you understand how it works and how you can claim deductions. By working them out, you can essentially recuperate all of your losses.
But let’s see how all of this works, and how it can end up being a benefit for you:
What Constitutes a Casualty Financial Loss?
According to the IRS, every citizen can claim a casualty loss, including truck drivers. However, not everything constitutes a casualty loss.
When discussing casualty loss for truckers, it’s usually about the damage and loss of a truck. To qualify for a casualty loss, a person’s property needs to have suffered damage, destruction, or to have been lost due to something sudden, unusual, and unexpected. By this, the IRS means things like:
- Volcanic eruption
- Sonic bombs
Essentially, if your truck is damaged or destroyed by a natural disaster or from vandalism, you become eligible for claiming casualty loss tax deductions. However, there’s more to this than that. The 2017 tax reforms brought those changes.
How Does Casualty Loss Work for Truckers after the Tax Reforms?
Before the tax reforms, almost any taxpayer was able to claim casualty loss deductions by meeting a few criteria. However, with the new reforms, the requirements have been slightly changed.
First of all, it became impossible to claim the deductions if the area where the disaster occurred hasn’t been federally designated as a disaster area. That essentially means that unless the President officially declares the area where the disaster occurred and where your truck was damaged or destroyed a disaster area, you cannot claim deductions on your loss.
As you can already guess, some smaller disasters were not recognized to be sufficiently destructive to call the area where they occurred a disaster area. For that reason, many people, not just truckers, were unable to claim casualty loss deductions.
That sounds bad, but the reforms did bring some good changes as well. If you meet all of these requirements, you don’t have to itemize your deductions, and you can still claim casualty loss deduction.
Now, when it, unfortunately, happens that you have to claim deductions due to a disaster, you can check the Federal Emergency Management Agency’s (FEMA) list of disasters to see if the area where your loss occurred was declared a disaster area.
How to Claim a Casualty Financial Loss Tax Deduction?
To claim your deduction, you first need to calculate your loss. When the loss affects a business, it’s usually calculated as the adjusted basis of the property. Adjusted basis is the original cost of the lost property, plus any improvements, and minus any depreciation, subtractions, and amortization.
When you get the price, then you have to deduct any insurance or some other form of reimbursement you’ve received for your loss. After that, you can file Form 4684.