Question

Insurance Claim

Forum|Forum|2 years ago
March 16, 2024
1 reply
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Our Condo unit above our house (rental property) had a leak in the bathroom which led to our unit resulted in water damage. It cost us 6,400 USD to do the repairs however, I received 11,000 from my insurance. How do I report this transaction on my tax return? Is Form 4864 need to be filed as I assume this would not be considered a casualty? Please advise if otherwise. We also sold the property last year as well.

D

DianeW777

No, you will not claim a casualty loss unless you are in a federally declared disaster area.

Three types of casualty losses are described in these instructions.
All three types of losses refer to federally declared disasters, but the requirements for each loss vary. A federally declared disaster is a disaster determined by the President of the United States to warrant assistance by the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). A federally declared disaster includes (a) a major disaster declaration, or (b) an emergency declaration under the Stafford Act.

The cost basis for your home portion of the property will be decreased by the loss and increased by the insurance proceeds.

If you choose to report the sale of your home, it will ask you about the depreciation you used for the rental. This will allow a partial exclusion for gain on your home if you qualify.

As you go through the rental asset section you will mark 'Sold, disposed of, etc...' then indicate it was converted to personal use. Write down the total depreciation for all years including this year. Say 'Yes' to Special Handling. This will allow the correct depreciation and all your expenses for 2023 for the rental.
Next, go to the Sale of Home and you will report the full sale. You will be asked if you depreciated it after May 5, 1997, you will answer 'Yes' then enter the total depreciation figure you wrote down from the rental when asked. You will be asked about total days owned and rental days, then TurboTax will calculate the exclusion and taxable portions of your gain.

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A

aminrajaniAuthor

Thank you for your valuable feedback. Can you advise which publication indicates the treatment of reducing the cost basis by loss and increase by insurance proceeds?