Rental Property Partial Fire, how to report insurance reimbursement

Forum|Forum|3 years ago
March 28, 2023
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My rental property was partial destroyed in a fire. The house is under construction to restore the property back to its original condition. To be clear, I am fixing the house to be back to its original condition (nothing luxury or fancy or add ons). I am receiving insurance reimbursement for the construction of the property (ie. to restore the house to original condition). How is this treated for taxes? What forms do I need to complete? Is the insurance reimbursement taxable even though I am spending it on restoring the house? I am not going to claim a casualty loss on the return. The house is also not going to be sold and continue to be rented once construction finishes in a few months. It's about a 3 month long construction process. Thank you!

Rental Property

KrisD15

If the insurance covers the damage, and the repairs are made, there will be no taxable event. No loss and no gain.

You are not allowed to deduct "Lost Rent" while it s under construction. (There is no such thing as a deduction for lost rent)

If you have insurance funds left over, that amount will need to be reported as a gain.

Here is more information.

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Victoria888Author

Thanks for this. I am wondering though since I will receive a 1099 from insurance, I need to report this as income so there probably is a form that would need to report the income and show less repair costs.

SharonD007

As @KrisD15 mentioned in the post above, the insurance proceeds that cover your fire damage are not taxable. The insurance company will not issue you a Form 1099 for your loss. It is not considered income.

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