Rental property - is an insurance claim payment for repairs subtracted from repair expenses? Where should it entered on the return?

[toderickson]

Had a plumbing leak which damaged wood flooring, drywall, etc. Water mitigation and dry-out was about $2500, repairs about $5000. Insurance claim payments were close to actual costs.
My question is how to compute the net repair expenses that are reportable? In other words, do you compute expenses as paid out minus claim payments? And how do you record this on the return?
Thanks!

[view2 · Accepted solution]

Insurance payments are to restore the property to the condition before the event.Cash outlay more than the insurance payout is either expense as a repair or improvement.,

Insurance payout more than the expense  outlay you have a taxable gain.

Do the calculation and maintain all documentation for proof and report the calculated difference on the appropriate schedule.

[CaanDo]

I have the same question. What is the appropriate schedule? Where do we enter this in TurboTax? Thanks. (Answered: see next comment)

[CaanDo]

Here is some good info as well: https://ttlc.intuit.com/questions/3048352-got-a-payout-from-property-insurance-of-5-000-do-i-report-...

[view2]

A horse of a different color.

[doninfosys]

This appears to be a bad link.  Where is the answer to the question?

[Carl]

You're doing it the hard way by going around your elbow to get to your thumb. It's simple really.

Payments received for rental property is reported as rental income. Period. It does not matter the source of the payment either and includes insurance payouts.

When you paid for that rental property insurance it was a deductible rental expense. Therefore a payout from the insurance company is reportable rental income. It gets included as a part of all rental income received.

The taxability of that insurance payout is offset by the qualified rental expenses it is used to pay for.

If what the payout pays for qualifies as a repair expense, then the cost of that repair is claimed/deducted as a repair expense.

If what the payout pays for qualifies as a property improvement, then the cost of that property improvement is entered in the assets/depreciation section so it is capitalized and depreciated over time.

Since you're dealing with a mere $5000 insurance payout, I seriously doubt you'll pay taxes on a single penny of it. However, it "might" lower your carry over losses to 2020.

[dwainewcarlson]

I had an insurance claim that paid 10,568.43 for damages to one of my rental from a flood from a washing machine overflow. I paid 6851.67 in repairs. 3716.76 in "taxable income".

Where in Turbotax do I put the 10,568.43?

I am assuming that the 6851.67 in the rental repairs (I would itemize the repairs that were done).

[Critter-3]

The insurance payout goes on the Sch E as income and the repair expenses on the Sch E as repairs.  Do not dive any deeper into the pool... Keep it simple.