Sorry to hear about your loss.In order to claim a casualty loss deduction, you must be prepared to prove not only that you lost property in a casualty, but the amount of your loss. This requires knowing your basis in the property, its pre- and post-casualty value and the amount of reimbursement you received.
If your property is covered by insurance, you should file a timely insurance claim for reimbursement of the loss. Otherwise you cannot deduct this loss as a casualty or theft.You can deduct the damage, to the extent that it is not covered by insurance, as a repair expense on your rental property. However, if you have claimed any insurance reimbursement as income, you may enter the entire repair cost.
Here is a Turbo Tax FAQ that will take you to where you can enter your loss.https://ttlc.intuit.com/replies/3301959
The damage to my rental was a combination of vandalism and deteration, which was inspected by the insurance adjustor and I was only compensated partialy for the vandalism and theft and a portion of repair costs. How do I handle this on my Rental Income?
You can claim the out-of-pocket expenses you incurred to restore the property. If you were partially reimbursed by the insurance company, you subtract the amount of reimbursement from the expenses paid. When you are renting a property, repairs (modifications required due to deterioration or, in this case, vandalism, but which restore the property to essentially the original condition) are fully deductible (minus tax-free reimbursements). Improvements (that is to say, a modification that increases the value of the property, such as an addition or a room remodel), must be capitalized and depreciated.
Since repair work related to vandalism restores the property to its original condition, and does not increase the property value, you may claim the expenses above what the insurance covered as repairs expenses on Schedule E.
You can use this treatment because rental income is a form of business income, and casualties can be directly deducted from business income. If it was purely personal loss, you would be limited to the treatment described above.
You do not get any deduction for loss of property value, however. Loss of property value works itself out at the time the rental property is eventually sold. The loss of value will result in a reduced price of sale, reducing the amount of gain you will end up reporting on the sale. While capital loss on the sale of a primary home is not deductible, capital loss on a rental home can be deductible if the rental home is not being treated as a primary residence for tax purposes. Usually, however, rental homes sales create gain because depreciation taken or allowable is factored into your original basis, lowering that basis and usually creating a gain as a result.
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This is a simple thing really ... you report the insurance reimbursement as income on the Sch E and the expenses for the repairs also on the Sch E ... this will balance off the 2 amounts. If you have more expenses then they are also deducted if they are repairs however if they are improvements they must be depreciated.
For instance ... say the kitchen cabinets/counters damaged and you repaired the damage then they are repairs due to the vandalism. However, instead of just repairing the damaged items you decide to undertake a complete kitchen remodel you would have an improvement not just a repair.
The damage to my rental was a combination of vandalism and deteration,
Can you be more specific? What are you calling vandalism? Did someone spray paint vulgar language on the front door. Maybe someone threw a rock through a window is all? Maybe they beat down the front door then went in and stole all the appliances? You need to *be* *specific*. There is a vast difference between vandalism and theft.
I was only compensated partialy for the vandalism and theft and a portion of repair costs.
The above statement is why you need to be more explicit, so I can provide you feedback that is actually useful to you. There are definable differences between "repairs", "maintenance", "theft" and a few other terms. Generally, insurance doesn't pay maintenance costs. On what insurance does cover, it never covers 100% because you have a deductible.
How do I handle this on my Rental Income?
That depends on the details so I can know "WHAT" needs to be handled.
Was the property under lease to a paying renter at the time?
Was the property vacant?
What exactly was stolen, damaged, defaced or otherwise rendered unusable until you restored it back to it's original condition?
Did you "in fact" do whatever was necessary to at least restore the property back to the way it was before the incident occurred resulting in an insurance claim?
Did you also do more than what was covered by insurance?
The below definitions will help you see why this matters (I hope). Then once I have more details I can assist with the insurance payout as well as costs incurred because of this. I will also need to know what each thing costs you to repair/fix/replace/restore/whatever so that we classify it correctly on the SCH E.
RENTAL POPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED
Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.
To be classified as a property improvement, two criteria must be met:
1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.
2) The improvement must add "real" value to the property. In other words, when the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.
Cleaning & Maintenance
Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.
Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.
Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.
However, when you do something like convert the garage into a 3rd bedroom for example, making a 2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.
My Renter passed away in January of 2019 and left her 17 year old son as the sole tennet! He had no job was still in school and was joined by a legal adult male friend to continue occupation of the house! Neither were employed and I assumed the power bill since it was winter and they were hopelessly behind payments of rent and utilities. In order to protect my plumbing I had to keep power on for the septic system and water to keep from freezing the systems!! Since he was a minor I was advised I could not just kick him out, so I agreed to let him stay until June when he would turn 18 and finish high school! In June I traveled there and asked them to vacate. I had given written notice in May. They refused and forced me to evict them! The eviction and serving of the notice cost me $1,290 The property was totally trashed! Upon completion of the eviction process, I entered the place with my Insurance representative and inspected the damages. I claimed vandalism and willful destruction! The damages were estimated at $4737.59 less depreciation and a $1,000 deductible; resulting in the amount of $2,246.58 paid to me. Furthermore; since I was unable to claim back rent until he was 18, for only the 1 month I performed repairs! I need to know where to claim these costs and reimbursments!