Rental House Fire

Forum|Forum|6 years ago
August 23, 2019
2 replies
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Hi - I have a rental home that I bought in June of 2015. I lived in it as my primary home and started renting it in February 2017. There was a fire in June of 2019 this year and it was a total loss for the insurance. The insurance is going to pay for the repairs of rebuilding the home and are also paying me for loss of rents. After they finish rebuilding it, I am planning on selling it. How much taxes will I have to pay on it?

FYI: I bought the home for $165,000, I've been adding it to my taxes as a rental and doing the depreciation since I started renting it in 2017. I have no idea how much we are going to sell it for, but my guess based on other homes in the area will be like $220K

Critter

Employee

Ok ... there are too many moving pieces to even try to answer that question and the TT program is ill equipped to handle this situation ... so I highly recommend you seek local professional assistance to tax plan for this unique happening and to complete the return later.

Carl11_2

Employee

You need to break this down and handle/deal with one item at a time.

1) Reporting the loss.

2) Dealing with the rebuild

3) Whatever you want to do next (sell, lease it out again, whatever.)

So for now, don't bother with items 2 and 3. Just concern yourself with item 1.

Now nothing happens until it's time to file your 2019 tax return. But what you can do if (AND ONLY IF) you have the CD version of TurboTax, you can do some rough figures by pretending the loss happened in 2018.

The first thing you do is back a backup copy of your original .tax2018 file located in the documents/turbotax directory. You*WILL* be making a lot of changes to it. So you need to be able to restore the original file before your start your 2019 tax return. Otherwise, you'll be royally screwed when you import data from he 2018 file into your 2019 taxes.

it was a total loss for the insurance

That statement requires clarification. While it may be a total loss for the insurance company, it is not a total loss for you, any way you look at it. This is because you still have the land. Insurance companies do not insure land. They only insure the structures on that land, and that's it. Therefore it's important to understand that "you" do *Not* have a total loss.

Still with me on this before I continue?

amycp7Author

Yes.

Carl11_2

Employee

I've attached a word document called Rental Property Fire Loss. You can download it and read it. More than likely you will not be selling the house in 2019 as you can figure at least 6 months to rebuild.

Make sure you understand how the loss rents payment from the insurance company will work, and that you will claim it as rental income received as such, in the year the insurance company makes that specific "loss of rent" payout.

Rental-Property-Fire-Loss.docx