Filing for roof replacement under Hurricane Helene in South Carolina while pending FEMA response

[MamaC1]

We had to put a new roof on our house in 2024 due to the extensive leaks and saturated boards from Hurricane Helene.  We filed insurance; however, they denied us stating roof was not properly put on when house was built in 2016.  We obtained multiple quotes and have that as the FMV to record using publication 547 for Federal Disaster method contractor safe harbor.  We paid 100% out of pocket for the roof.  After the insurance denial, we filed for FEMA assistance, which is still pending review.  

I filed an extension from the May deadline the IRS set for those in the disaster area in SC.  However, with the extension deadline approaching, do I go ahead and file our 2024 taxes posting the loss at the cost to replace the roof?  What do I do since I cannot reasonably estimate any reimbursement?  Do I just record any funds received on my 2025 return as income after consideration for the cost we paid or for the benefit we receive if any from our 2024 tax return filing?  Or, do I file an amended return for 2024 in 2025 if FEMA issues us reimbursement?

Don't want to make a mistake! 

[marctu]

You should file the 2024 tax return prior to the deadline of October 15, 2025, so approximately four months and a few days from today.     

FEMA payments  are Qualified disaster relief payments, and these payments are not subject to income tax, self-employment tax or employment taxes of a self-employed individual, unless the expenses were also covered by insurance or other types of reimbursements.  (See Publication 525 page 31.)

So the only time that the Tax Benefit Rule (See Publication 525 page 24), is if there is an insurance reimbursement, which based upon what you wrote is not the case. 

If there is an insurance reimbursement then this is the relevant part of the Tax Benefit Rule from above. 

You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year.

I am so sorry for your loss, and hope this answer helps @MamaC1 in that the FEMA payment is a Qualified disaster relief payment.  

All the best,

Marc T.

TurboTax LiveTax Expert

28 Years of Experience Helping Clients

 

[MamaC1]

Good evening, Marc T.:

Thank you so very much for the response.  Do you believe I am correct in then using the amount per roofer contract as the amount of casualty loss incurred in 2024 on Form 4684 or Schedule A?  Does it matter if some was paid in 2025 due agreed upon payment schedule?  Can I still record the whole amount as a loss in 2024?

If any FEMA reimbursement does not have to be reported and I know I will not get any insurance reimbursement, would it make sense to proceed with filing our return?  This was the only item we had open.  

Thank you so much for your time and knowledge sharing!!

Regards,

MamaC1 

[mtufaro · Accepted solution]

As far as the amount, I agree with how you are proceeding with using what the roofer charged you.  For the second part, generally, a casualty loss, including a disaster loss, is deductible in the tax year the loss is sustained, so the fact that you paid some of the cost of the repair in 2025, is not dispositive.   

On the third question, you should go on and proceed with your filing, since you state that you will not get an insurance reimbursement. 

All the best,

Marc T.

TurboTax Live Time Tax Expert

28 Years of Experience Helping Clients