I am constantly replacing equipment that my employees lose. Is any of this lost equipment deductible?

The key to business expense deductions is ordinary and necessary.

To determine whether you can deduct an expense, ask yourself: Is this expense both ordinary and necessary to the business? The IRS requires both elements.

1. An expense is ordinary if it is common and accepted in your industry.
2. An expense is necessary if it is helpful and appropriate for your business.

According to the IRS, you’re entitled to a deduction for losses for the full fair market value of your property, but...

You can deduct only the amount of loss that was not reimbursed by insurance. 

• If you claimed depreciation on any of the property in prior tax years, you can only deduct the adjusted (depreciated) value.
• If the property was insured, and you’d previously claimed depreciation on it, but the insurance paid you more than the adjusted value, you’ll have to pay income taxes on that gain…unless you use the extra money to replace the stolen property sometime within the next two years.

You may be able to deduct it from your inventory, if that applies. Losses due to the negligence of employees, if reasonable, may be  considered deductible.  Please consult the following guidance to determine the deductibility of your losses.
 

Click here for Publication 535, Business Expenses.

Click here for additional information on business deductions.