How to report insurance reimbursement recieved one year for a theft loss in a prior year?

Forum|Forum|7 years ago
June 6, 2019
2 replies
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We suffered property damage from hurricane Irma in 2017. However, insurance settlement took considerable time and we did not receive reimbursement until well in to 2018. Do I report the loss in 2017 the year it occurred and the reimbursement in 2018? Or do I file an amended return for 2017?

TurboTax Basic Windows

Critter

Level 15

I stand corrected ... however if you had known what the reimbursement was to be and you entered that amount on the 2017 casualty loss form then you have nothing to recapture or correct... this is the preferred method of handling this situation ... so review what you did and make the entries needed ...

.<a rel="nofollow" target="_blank" href="https://www.bpbcpa.com/real-estate/tax-treatment-casualty-losses-casualty-gains-2017-hurricanes-arkadiy-eric-green-cpa/">https://www.bpbcpa.com/real-estate/tax-treatment-casualty-losses-casualty-gains-2017-hurricanes-arkadiy-eric-green-cpa/</a>

Opus 17

Level 15

You do things when they happen. If you have a loss in 2017 you report it in 2017, and you report the income, if it is income, when you actually receive it, in 2018.

Insurance payouts are rarely income, however.

If you have not deducted the loss in 2017 then the reimbursement is probably not taxable income. It will only be taxable income if the reimbursement is more than your actual loss. For example, if you paid $200,000 for your home and insurance paid $300,000, then you have a $100,000 capital gain—but if you use the money to rebuild, you have no capital gain because the payment is not more than your adjusted cost basis.

If you did deduct the loss in 2017, then you will have to report the insurance in 2018 as a taxable recovery (reimbursement of a previous deduction). This is in the Other Misc Income section at the bottom of the wages and income page. But you only report up to the amount of prior tax benefit. For example, if you took a $200,000 casualty loss, it would be limited by a $100 deductible and by 10% of your AGI. So your actual deduction might have been $185,900. Even if the payout was the full $200,000, your taxable recovery is only the amount you previously deduction, $185,900.