I received a 1099-MISC from my mortgage company. The money was from an insurance claim due to losing home in tornado. Is that money taxable and need to be claimed?
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I received a 1099-MISC from my mortgage company. The money was from an insurance claim due to losing home in tornado. Is that money taxable and need to be claimed?

Was under the impression that money from an insurance claim was non-taxable but when I enter it into turbotax it is telling me I owe $42,000 in federal taxes on $152,000 for my insurance claim. Don't know how to report it without it telling me I owe tax.
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Employee Tax Expert

I received a 1099-MISC from my mortgage company. The money was from an insurance claim due to losing home in tornado. Is that money taxable and need to be claimed?

You are correct.  It's probably not taxable.  In essence you have "sold" your home to the insurance company after the disaster, and we are sorry for your personal loss and hope all else is well with you.  There are two situations that guarantee the amount is not taxable:

  1. The amount you received is less than the purchase price of the home plus improvements made (known as the basis in the home).  For instance, if you purchased the home for 140,000, but had to pay taxes and closing costs of 5,000, and later did a kitchen remodel of 10,000, you have spent 155,000 on the home.  The 152,000 payment is actually a 3,000 loss.  Your payment is not taxable
  2. The amount you received is a gain, but you have lived in the home at least 2 of the last 5 years and it is your principal residence.  You may exclude the gain and it is not taxable.

If the amount you received is a gain, however, and it has not been your primary residence 2 of the last 5 years, the difference is capital gains income and must be reported, and possibly taxed.

You will enter this information in the Sale of Home section, which this FAQ will help you to find:  https://ttlc.intuit.com/replies/3300213

In fact, if the settlement is actually significantly below your basis, you may be able to claim a deduction based on a Casualty Loss.  Here is an FAQ on this information:  https://ttlc.intuit.com/replies/3301959

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