Taxation and Property, Casualty, and Liability Insurance

In the wake of Tropical Storm Imelda, you or others may have sustained property damage, which may have tax implications.

In general, individuals and business owners purchase property, casualty, and/or liability insurance to guard against disasters and other risks to property, and also to guard against lawsuits by persons injured on (or because of the use of, or condition of) the property. The tax rules applicable to property, casualty, and liability insurance differ, depending on whether the policyholder is an individual or a business owner. For example, individuals generally must itemize deductions in order to claim a casualty loss, and the amount of the deduction is limited. For corporations, on the other hand, the entire loss is allowed as a deduction against business income. Both individuals and businesses are required to file timely insurance claims and must offset reimbursements against losses.

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