How do I handle insurance payments for flood damage? Is it income or adjusted by the damage estimate?

[TomD8 · Accepted solution]

If you are claiming a Casualty Loss on your tax return for the flood damage, you must reduce the amount of your claim by the amount reimbursed by insurance.

Insurance reimbursement is normally not considered income.  However, if you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. However, if any part of the original deduction didn't reduce your tax for the earlier year, don't include that part of the reimbursement in your income. You don't refigure your tax for the year you claimed the deduction.

https://www.irs.gov/publications/p17/ch25.html#en_US_2016_publink1000173595