Form 4684 Disaster Claims

[ForestRanchSteve]

We had two natural disasters happen last year (2023). One, a 120 foot tree fell thru our roof and caused major structural damage to the tune of $250,000. Insurance paid for most of that one except for replacing the roof ($6000) and my deductible ($2500). In the second disaster, we got 5 feet of snow and had 3 outbuildings destroyed. I had two replaced for just over $4000 and decided not to rebuild the third. 

Both of the incidents were within a federally declared disaster area and were given FEMA disaster numbers (DR-4699 and DR-4683). 

My question is really about the first disaster. I did not get the house appraised after the tree hit it but have plenty of pictures. If I am reading the rules correctly, I must provide a before and after appraisal of the house and then there is a clause regarding the lessor of the Fair Market Value, all which sounds confusing. 

Also, I retired in 2022, this all happened last year. I understand that I could choose to file the 4684 as an amended return for the year 2022. I made more money that year and paid much more in federal taxes. Is that recommended? 

Thanks!

[RobertB4444]

Appraising the house in your case isn't necessary.  Take the value from the tax rolls and use that as the before value and then deduct the cost of the repair and use that as the after value.  The damage from the disaster reduced your home value by that much.

It might be worth amending 2022.  You should run the numbers both ways and see which way it helps the most.

@ForestRanchSteve 

[ForestRanchSteve]

Thank you for your answer. Unfortunately, here in California, the property is assessed on the year it was purchased and does not in any way reflect the amount that the house is worth. I bought the house in 1996 for $116,000 and did an addition in 2004 for $111,000. If I use the cost as $227,000 (Form 4684, line 2) and then subtract the insurance payment of $268,000 for repairs, I am in a gain situation (line 4). The lowest bid to repair was $282,000, which I took. I spent over $8,500 of my own money to repair the house. Is that not deductible?

[MarilynG1]

Yes, you want to claim a loss for what you spent out of pocket.  If the insurance company gave you 268K for repairs, add what you spent, plus your deductible, and that is the FMV of the property prior to the loss (about 278K, approximately).  The FMV of the property after the event is $0. 

Report the 268K as insurance reimbursement, and you are claiming a loss of the remainder.  In other words, it took 278K to restore you to wholeness; 268K of which insurance paid for. 

@ForestRanchSteve