AirBnB Reimbursements for Guest Damages

[colonelcline]

We had a guest start a fire causing a lot of damage to a cottage in July 2023. It took 8 months to repair (and we are still finding things to fix).  AirBnB reimbursed us $95,000 in Jan 2024 based on a high estimate we received. The cottage repair was not started until Jan 2024 and only took about $65,000 to repair. We had to repair structure like wall coverings, flooring, HVAC  and replace items like furniture, appliances.  I've seen a few ways it might be done but remain confused. Can someone help clarify?

Thanks

We received loss of income from our our insurance company and I put it in Other Income for the LLC and not with that particular cottage as rental income. Think that was right?  

[SabrinaD2]

The excess reimbursement from Airbnb, $95,000- $65,000 ($30,000) may be considered taxable income. According to the IRS, if the amount you receive in insurance or other reimbursement exceeds the adjusted cost basis of the property (original cost plus improvements minus depreciation), you may have a gain. For detailed guidance, refer to IRS Topic No. 515, which discusses casualty, disaster, and theft losses.

Regarding the loss of income insurance, reporting it as "Other Income" for the LLC is generally correct. The IRS notes that insurance payments for lost business income are normally taxable and should be reported as income.

For further clarification, you can refer to IRS Publication 547, which provides detailed information on casualty, disaster, and theft losses.