Rental fire

Forum|Forum|3 years ago
March 25, 2023
1 reply
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My rental property had a fire and was not rented for 9 months of the year. I received “loss rent” from my insurance company which I am claiming as rent. My insurance company paid another company to mitigate and repair but the costs exceeded the policy. I didn’t receive the funds, they went directly to the repair company. The loss exceeded my coverage so I am also using the HOA insurance. They paid the HOA and the HOA is controlling the distribution to the repair companies. How do I handle this? Do I claim the rent income but say that the place wasn’t rented for most of the year. What do I do with the insurance money paid out, but not to me? Do I not claim it anywhere and not specify the repair bills and costs? The whole thing is a total headache and now I’ve got to try and understand how to do taxes for it! Help, please.

Not A Product Question

Carl11_2

Employee

Do I claim the rent income but say that the place wasn’t rented for most of the year.

You claim that portion of insurance payout that was designated as rental income, "as" rental income. The property remains "in service" since the insurance company did "in fact" pay you rent for the period of time it was uninhabitable.

What was paid by insurance is not reported anywhere on your tax return. What "you" paid out of pocket is added to your cost basis of the property. (cost basis of the structure only - not the land). The amount you paid out of your pocket gets entered as a property improvement in the assets/depreciation section, classified as residential rental real estate and depreciated over the next 27.5 years with depreciation starting on the first day a renter "could" have moved in. Generally, that day will be on or after you were issued your Certificate of Occupancy by the building department, or whatever department in your county is responsible for enforcing building codes.