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Money Left Over from Insurance Claim and Repair Expense

Forum|Forum|1 year ago
February 15, 2025
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Last year, during Hurricane Uri in the aftermath of a giant branch going through my wife's car, we got a check from the insurance company for the amount of $4,477.83.

From the money we received, my wife only spent $2,875 on repairs.

Do I need to report the $1,602.83 difference? Where would I enter this in TurboTax? Please don't give me the form name but the menu where I enter this amount in TurboTax.

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Best answer by MonikaK1

You probably don't have to report the excess reimbursement as income. A casualty loss is based on the decrease in fair market value of the property. The amount paid by insurance may have been based on the actual estimated decrease in the value of the vehicle rather than its repair cost. Check your policy or contact the company if you have questions. In some cases, you might need to return the excess payment to the company,

The fair market value before the loss is what the item would have sold for on the open market immediately before the casualty. The fair market value after the casualty is what the item would have sold for on the open market after the casualty. If an item was completely destroyed or lost, the FMV after the casualty is zero.

When the amount you receive from the insurance or other reimbursements is more than the cost or adjusted basis of the property you may have a capital gain. You must ordinarily include the gain in your income unless you're eligible to exclude or postpone reporting the capital gain. However, if you have a personal casualty capital gain for the tax year, you may be able to deduct the portion of the personal casualty loss (even if not attributed to a federally declared disaster area) to the extent the loss doesn't exceed the personal capital gain. For more information, refer to this IRS webpage or Publication 547.

See this TurboTax help article for instructions for entering a casualty loss from a Federally declared disaster area.

M

MonikaK1Answer

You probably don't have to report the excess reimbursement as income. A casualty loss is based on the decrease in fair market value of the property. The amount paid by insurance may have been based on the actual estimated decrease in the value of the vehicle rather than its repair cost. Check your policy or contact the company if you have questions. In some cases, you might need to return the excess payment to the company,

The fair market value before the loss is what the item would have sold for on the open market immediately before the casualty. The fair market value after the casualty is what the item would have sold for on the open market after the casualty. If an item was completely destroyed or lost, the FMV after the casualty is zero.

When the amount you receive from the insurance or other reimbursements is more than the cost or adjusted basis of the property you may have a capital gain. You must ordinarily include the gain in your income unless you're eligible to exclude or postpone reporting the capital gain. However, if you have a personal casualty capital gain for the tax year, you may be able to deduct the portion of the personal casualty loss (even if not attributed to a federally declared disaster area) to the extent the loss doesn't exceed the personal capital gain. For more information, refer to this IRS webpage or Publication 547.

See this TurboTax help article for instructions for entering a casualty loss from a Federally declared disaster area.

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