I can't stress enough the importance of correct tax reporting for this event. While it may or may not be simple, if doing it yourself with TurboTax, it is most definitely doable. I can walk you through the process if you like. But I need some clarification as well as some additional information.
- In what tax year did the fire occur?
- Did you rebuild the property after the fire?
- In what tax year did you start the rebuild, and in what tax year did you finish the rebuild?
- Assuming a rebuild occurred, is it rented out again?
- If rebuild still in progress, do you intend to rent it out again?
Correct reporting of things on your tax return is of *VITAL* importance here. For one thing, the property is not a total loss, regardless of what the insurance company may say. That's because the insurance company did *NOT*, can not and will not insure the land. When it comes to rental property, land is not an insurable asset. So while it may be a total loss to the insurance company for the loss of the structure insured by them, it is *not* a total loss for you, any way you look at it.
The insurance company sent a check to me and the bank.
So am I correct in the following statements?
- The property was declared a total loss by the insurance company.
- The insurance company sent a check to the bank *ONLY* for the balance due on the mortgage.
- The insurance company sent a check to *you* for the remaining amount covered by your insurance policy.
If the above is not 100% correct, then please let me know what *is* correct.
The bank had me get tax info from the contractor.
What contractor? One you hired? For what purpose? Rebuilding maybe?
Then cut a check to me .
The *BANK* cut you a check to *you* personally? If so, why? The only reason I can see for this, is because the insurance company overpaid the bank their balance due on the mortgage. If so, please confirm that I am correct on that. It's also possible that separate check could be for "loss of rent". Generally with a rental dwelling insurance policy, that policy includes a loss of rent provision where the insurance will pay you up to 85% of lost rent for anywhere from 6 months to a year. This "REALLY" matters for correct tax reporting of everything paid to you by the insurance company.
