Tax consequences of payout by insurance company

Forum|Forum|1 year ago
December 22, 2024
2 replies
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Is the payout on a policy, rather than rebuilding the house, taxable? If the property is subsequently sold, is the total amount of the insurance payout, combined with the sale amount to determine the amount subject to capital gains tax?

Best answer by M-MTax

Section 1033(a)(2)(B) gives you 2 years.

M-MTax

If you don't use the insurance proceeds to restore the property then you can look at the payout in terms of reducing the basis in the property - assuming this property is being held for personal use,

docbob235Author

The property has been sold for an amount that is only a modest amount above its original purchase

M-MTax

How did you use the insurance proceeds?

If you did not use them to repair or replace damaged property, then you need to subtract those proceeds from your original cost basis - your purchase price.

docbob235Author

Thank you for your response. I think I understand the particulars.

I spoke with online help as well this week, and they made the same points you did, but with the chance to talk to them directly I think I understood more.

I do have a remaining question , assuming I am supplying, when I file, the property closing statement (also known as a 1099S) and a detailed list of expenses incurred to effectuate the sale and the home improvements made to the property over my residence there as best I could, given that actual receipts and computer records were lost in the fire. I have posted them to my account here but need to be assured by the online help that I have done that correctly. The question is how long do I have to purchase a new home to avoid a capital gains tax. The closing on the property was 12/19/2024 , the fire a month before. Do I have a year to purchase another property?