Question

Hurricane Ian Casualty Loss for Vacation Home/Rental

Forum|Forum|2 years ago
August 6, 2023
3 replies
0 views

I have a vacation home/rental purchased in 2020 that was damaged by Hurricane Ian. I have received approximately $90,000 in insurance proceeds. A portion of that was for loss of use and personal property. The decrease of the property in FMV is lower than the adjusted tax basis which includes depreciation for the rental percent. How do I enter this in TT because it only gives me a choice of personal loss or business loss and this is actually some of both. Also the printed Form 4684 does not print "Florida Hurricane Ian" in bold at the top as per the IRS instructions although the Form 4684 does have the FEMA code. I am getting a large deduction on Schedule A that reduces my tax liability considerably. I feel I must be doing something wrong. It also appears to treat the loss as occurring as a "Qualified Disaster Loss". I was not aware that designation had been made. Only that is is a federally declared disaster which is treated differently for tax purposes, Thank you in advance of any help you may give me.

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Anonymous_

Employee

@ladylake wrote:

The decrease of the property in FMV is lower than the adjusted tax basis.........

Did you reduce your loss by the amount of insurance proceeds you received?

Perhaps @Mike9241 can help with the data entry (etc.).

O

Opus 17

Employee

We need to know more about the business use of the home. The instructions for form 4684 include special rules for when the home is partly used in business.

https://www.irs.gov/instructions/i4684#en_US_2022_publink12998zd0e813

I have never used these special rules before or tried to enter them in Turbotax, so I don't even know if turbotax includes the necessary calculations. Someone else may know.

@Critter-3

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ladylakeAuthor

I'm not sure how much of my response got to you earlier. Just as I was working on it we had a tornado warning and I shut my computer down. As I said then, the casualty loss was to my vacation home in FL which I also rent out during the winter. I did deduct the insurance proceeds but as I said, they were a combination of loss of use (rental income), repairs and replacements to my condo and replacement costs to furniture and appliances, which had a business percentage and a personal use percentage. I assume I need to allocate all amounts but I still don't know how to input the data because it seems to me that the input for the form is business only or personal use only. I see your link about the special rules. One of the reasons I have been putting off dealing with this is that I really don't know how to figure out exactly if I have a loss or a gain and how much. I also used the de minimus elections for all assets. I purchased the condo in 2020. Tax year 2021 was the first year that I had rental income.

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Anonymous_

Employee

Generally, if insurance proceeds have made you whole (i.e., the recovery has fully compensated you for your loss), then you have nothing to report on your federal income tax return on Form 4684.

However, you would normally have to report that part of the insurance proceeds that were attributable to lost rental income as rental income on your federal income tax return (Schedule E, typically).

It is not clear how you determined FMV (which metric or modality), but caution needs to be exercised in that regard. I can tell you from personal experience, having also been through Ian and having made insurance claims, that the FMV of my properties actually increased after the storm.

Finally, if you used the entire portion of the insurance proceeds that was allocated to damaged/destroyed property to effect repairs and replace personal property, you likely have neither a gain nor a loss.

M

Mike9241

@ladylake I've looked at form 4684 and instruction and Turbotax and its instructions and I have not figured out a way to enter the appropriate info. from 4684 instructions that concerns me as to the loss you can take on the rental portion

For a home you rented out or used for a business for which you aren't filing Schedule C. see section 280A(c)(5) to figure your deductible loss. Attach a statement showing your computation of the deductible loss. There is nothing like this in Turbotax.

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I THINK this limits the deductible casualty loss attributable to the rental portion to the net rental income with any excess loss carried over.

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Ian is not a Qualified Disaster Loss though a bill was introduced in the US House in March 2023. it has not yet been passed into law and one legislator only gives it a 5% chance of approval.

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I would advise you to consult with a tax professional for this matter or wait to see if others have any other suggestions.