How and where do I report water damage on my rental property when the damage occured in the last quarter of one year, and the repair happened the following year?

Forum|Forum|1 year ago
March 20, 2025
3 replies
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In November, my rental property had water damage due to freezing pipes. After an insurance adjuster filed his report, I received a claim reimbursement for damages of $9340.00, after the deductible of $1798.00 and depreciation of $2784.32 was subtracted. I also received $6350.07 for the cost of the Water Mitigation.

Since the water damage occurred at the end of the year, and the reimbursement check was received just before Christmas, the repairs were initiated and completed the following year.

I have no idea how or where to report this.

Please help.

Best answer by PatriciaV

The mitigation payment is related to the casualty loss, so you would include that with the reimbursement check.

Your basis in the property is not what you need to calculate the change in market value due to the casualty. Contact a local real estate professional for help determining the before and after market values for the property.

Additional information: IRS Instructions for Form 4684

Mike9241

form 4684 instructions answer your question as to when to claim the loss and the form (section B) needs to be filed to claim your casualty loss. if you have difficulties completing it you may want to consult a tax professional or use Turbotax Live

(abbreviated from 4684 instructions)

The loss is not sustained until you know with reasonable certainty whether reimbursement will be received. You got the check in 2024 so you know for certainty in that year.

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what is the amount of your loss?

This involves knowing the fair market value of the property before and after the loss.

DeeSHCAuthor

The reimbursement for the repair is $9340 and the water mitigation check is $6400. How do I report the mitigation check since it is not used for repairs but to clean and dry up the water? Can I use the basis of the rental property to calculate the before and after valuation?

PatriciaVAnswer

Employee

The mitigation payment is related to the casualty loss, so you would include that with the reimbursement check.

Additional information: IRS Instructions for Form 4684

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uwrgtriangle

<p>If water damage affected your rental income or required repair costs, you can report it on Schedule E as a rental expense. Keep all receipts and documents. If it’s a large loss, you may need to consider casualty loss reporting too. Consulting a tax professional is a smart move here. </p>

uwrgtriangle

You can report water damage to your rental property as a casualty loss on IRS Form 4684 (Section B for property not covered by insurance). Deduct unused repair costs from Schedule E. Keep all receipts and documentation for proof. Consult a tax pro for specific situations that differ.