Federally declared disaster DR-4557-IA

[rdhatcher]

How does one enter this when the damage to the property is reparable and is covered by insurance with the exception of the insurance deductible?  It seems as if the questions/entries are only relevant to replacement of property.  In our case, we need the roof replaced and both that and the tree damage that had to be cleaned up are covered except for the deductible.  Turbotax is asking for the cost basis for the property and the amount the insurance reimbursed.  This would seem to give the impression that the house and property were destroyed and that we were reimbursed only a fraction of the value.  Also, assuming that there is some way to make it understood that the deductible is the actual loss, is there an exclusion of some percentage of the AGI before the loss has an effect?

[gloriah5200]

We wish you the very best for your recovery efforts. As always, we're here to help you with your tax questions.

The way you reflect the "costs of the repairs" is the difference between the fmv before and the fmv after the loss which are items asked for on the Form 4684.

The information being asked of you is exactly from the IRS Casualty Loss Form 4684.

It asks you the cost basis and then the insurance reimbursement to see if you received more insurance money than the adjusted basis (gain on loss).  If not, then it asks the fmv before and after the loss.  The difference between the two amounts for the fmv before and after the loss basicly is a reflection of the cost of the damages due to the casualty that occurred.  

You can reflect the fmv before and after the loss by the amount it will cost to make the repairs back to its "previous condition".  You cannot include costs to make it better than it was before the storm by having major improvements as far as the amount included in the Form 4684 losses.

Of course, once TurboTax determines the amount of your loss, it will then subtract from it the amount of insurance payment you received.

You may have several losses from the one casualty.  Each will need to be entered separately going to a separate column of the 4684.

You may have more than one casualty, in which case, you will need more than one Form 4684.

Depending on the situation, there may be a $100 and a 10% agi reduction or a $500 reduction.  

[Edited 04/05/2021|5:09 pm pst]

[rdhatcher]

Thanks for your detailed reply.

[ToddL99]

From: Publication 547 (2020), Casualties, Disasters, and Thefts:

If you suffered a qualified disaster loss, you are eligible to claim a casualty loss deduction, to elect to claim the loss in the preceding tax year, and to deduct the loss without itemizing other deductions on Schedule A (Form 1040). Your net casualty loss from these qualified disasters doesn’t need to exceed 10% of your adjusted gross income (AGI) to qualify for the deduction, but the $100 limit per casualty is increased to $500.

See Qualified disaster losses , later.

See also IRS.gov/DisasterTaxRelief for date-specific declarations associated with these disasters and for more information.