Disaster Deduction on rental property FMV vs repair cost deduction

[ncrental2012]

Hurricane Beryl (July 2024) damaged my newly purchased rental home roof. House was bought just a week earlier. So I know exactly the FMV before the hurricane. Let's call it $400K. 

Roof repair estimate was $15,000.

Since my agent was still helping me find tenants, she said the AFTER FMV would be $400K-$15K = $385K since any buyer at this point would want to new roof. Simple right?

Because I had spent all my cash on the purchase, I decided to just do the minimum fix of the roof for $1K to stop the water leaks. In other words I spent $1K on the temporary repair. Per my agent, no buyer would've paid me more then $385K since the roof was still damaged (shingles blown away, but not leaking).

Question: On Form 4684, Section B, is it safe to take $15K deduction based on $385K FMV post the disaster?

OR
Do I take $1K deduction because that's what I actually spent on the repair?

Note: No insurance, no reimbursement or anything coming. Pure rental property, nothing to do with any personal property or MAGI. Did not do appraisal after the hurricane.

[PatriciaV]

Because you are not expecting an insurance reimbursement for the casualty loss, you may claim the entire reduction in fair market value of the property.

The deductible may be reported as a rental repair expense.

[ncrental2012]

Thank you, PatriciaV

Just to confirm, when you say "you may claim the entire reduction in fair market value of the property", it means I can enter $15,000 casualty loss in Form 4684 Section B. Right?

I'm not sure if I understand your comment "The deductible may be reported as a rental repair expense." Does this mean I can enter $15,000 rental repair expense in Schedule E? Or are you saying I can enter $1000 rental repair expense in Schedule E?

Please confirm both.

Thanks.

[PatriciaV · Accepted solution]

Yes, the reduction in fair market value is your casualty loss to report on Form 4684.

Only the actual amount you spent to temporarily repair the damage would be reported as a rental expense.

[ncrental2012]

Thank you. I'll do exactly that on my TT return filing.