Rental property casualty loss due to fire and capital gains

[rmcmahon15]

I own a rental property that had fire/smoke damage in 2021.  This was not a total loss on my property.  My insurance company provided payment for property repairs of $22,921.  I had to pay my deductible of $2642.  Does the fact that I had to pay a deductible qualify me for a casualty loss? If so how do I claim the loss.  I am planning on selling the property in 2022.  How do the insurance payments  factor (if at all) into the capital gains calculations?  

[ColeenD3]

Yes, you can take the loss, and yes, the amount will lower your basis.

Your original basis in property is adjusted (increased or decreased) by certain events. If you make improvements to the property, increase your basis. If you take deductions for depreciation or casualty losses, reduce your basis.

To enter this in TurboTax:

1. Got to the "Federal Taxes" tab
2. Click on "Deductions & Credit" 
3. Scroll down to "Other Deductions and Credits" and click on "show more" to the right of it
4. Click "Start" next to "Casualties and Thefts" continue to follow the onscreen guide. 

Pub 551

[rmcmahon15]

Thanks for the quick reply - so in this example the adjustment in my basis would be in the amount of my deductible (not the entire amount my insurance company paid) for which I would take a loss?  So I would adjustment my basis down by $2642 (the amount of my deductible)?

[ColeenD3]

Yes, just by the amount of the deductible, but only if you take the loss