Lost Rent Reimbursement from insurance company related to water damage to rental condo. Do I need to claim?

[darrell-lomelino]

I had water damage in rental condo this past year which insurance covered. In addition, they provided reimbursement for lost rent during the 3 months it took to repair the unit as it was deemed "unlivable" as a result of the damage so I had to let my prior tenant out of their lease early. In addition, we choose to not use use the same grade of materials in the repair so the net proceeds exceeded repair costs by about $2,500. Do I need to claim one or both of these as income in some way?

[Leonard · Accepted solution]

You will report the insurance settlement that replaces the lost as taxable income. This money is subject to the same income and expense deduction rules as your ordinary rental income would be.

You do not have to report the $2,500 balance remaining from your insurance reimbursement.