Our rental home was heavily damaged by fire in 2020. The insurance company has been covering lost rent. How do I account for this in Turbotax? The house is inhabitable

[ThomasM125 · Accepted solution]

The money you receive from the insurance company for rent would be reported as rent income. You would deduct the rental expenses you normally would, such as utilities and repairs, property taxes, mortgage interest, etc...

[Carl]

Typically, all income received for rental property from any source for any reason is treated as rental income and reported in the rental income section. This would include insurance payouts. How you deal with the situation after that, depends on your intentions of what you will do with that payout. Rebuild? Abandon? Sell "as is", or something else?

I'd also like to know if the structure was considered a "total loss" by the insurance company, as that can open up other options for how you treat the insurance payout.

To take note that in general, a rental dwelling insurance policy includes in it's coverage's anywhere from 6 to 12 months of "lost rents", usually maxed out at 85% of whatever the contracted rent was you were collecting prior to that. Therefore, the property remains "in service" because the insurance company is "in fact" paying you rent for the property for whatever period of time the "loss of rent" clause in your policy may cover.

[cestmoijay]

I had a fire in Oct 2021 in my rental property.  Insurance company paid out total renovation cost + Loss of Use of 12 months in Dec 2021.

How did you treat the rental income?  Did you pro-rate in 2020 and then some in 2021 (i am assuming the covering of lost rent also went over to following year?  Or did it?  Did you get a 1099-MSC from your insurance company if so?