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I had a house that was samaged in a hurricane. The insurance

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claimed it as a total...
I had a house that was samaged in a hurricane. The insurance claimed it as a total loss. Do I have to report this to the IRS?
Submitted: 9 years ago.Category: Tax
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Answered in 1 hour by:
10/3/2008
Tax Professional: Lev, Tax Advisor replied 9 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
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Yes - these money should be reported - that doesn't mean the total proceed is taxable.

 

Generally - you need to identify the fair market value of the house before it was damaged and the fair market value of the house after it was damaged. It the property was a total loss - that value would be zero.

The difference would be your casualty loss.

If the amount of insurance compensation is less than your casualty loss - you may claim a deduction for the difference.

If - however - the amount is more than your casualty loss - the difference is your gain and it is taxable.

 

You may find more details in the IRS publication 547 - http://www.irs.gov/pub/irs-pdf/p547.pdf

Let me know if any clarification is needed.

 

Lev
Lev, Tax Advisor
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