I have a rental property that had fire damage in March 2023. Insurance paid for lost rent until now, and paid 200k for restoration in September 2023. I talked to several contractors and their estimation are all more than 500K for the restoration. So I have to hire a public adjuster to negotiate with the insurance company. We haven’t started the restoration until now because the negotiation is not fully settled down yet. Our plan is to start restoration in this year (2024) and rent it out again when restoration is done.
My question: how should I handle insurance payout that was given to me in 2023 (200K). Do I need to put it somewhere in TT in my 2023 tax return? If I include insurance payments as income, it will cause large tax liability for me in 2023. Can I calculate everything after the restoration is done and include this in my 2024 tax return?
Thank you in advance for all your help.
