My home burned in the 11-08-2018 Camp Fire in CA and I guess I owe capital gains tax on my ins settlement. How do I defer this owed amount to be paid later?

[hypothecary]

This tax owed was deferred to be payed later by my CPA who filed my 2018 taxes for me. He also told me that I will avoid owing this tax if I spend the amount owed or more on replacement housing expenses. Since I plan to purchase a replacement home in 2020, I would like to defer the amount owed on my 2019 taxes but I don't know how to accomplish this. My CPA said he simply filed a note with my taxes and was not willing to explain in detail how I can do this myself.

[ThomasM125]

If you reported the gain and non-recognition of it in 2018, and you didn't receive any insurance proceeds in 2019, then you don't need to report anything on your 2019 tax return. If you received insurance proceeds in 2019, then you need to attach a statement to your 2019 tax return reporting the details of the property loss and insurance proceeds, a calculation of the gain your are deferring, when you are going to replace the property and how much it will cost. 

[Miki-2022]

Can I have some clarity on this? We are in a similar position.  can we claim the loss when we pay out to contractor to rebuild this year? 

[NCperson]

@Miki-2022 - the posts above are quite old.  can you write a few sentences about what your situation is?  and please indicate if the loss was subject to a natural disaster declared by the Federal Gov't (and which one)

[Miki-2022]

Hello,

Yes, it was a national disaster. It was the River Fire (lumped together as a national disaster with other Northern CA fires last summer). Our accountant was able to offset some of the taxes, even though payments were more than the adjusted basis.  We bought the property, just a year earlier, before prices inflated tremendously in this area, especially construction costs. So the damages were far more than what we received from insurance, however, this was still considered a gain. 

[NCperson]

@Miki-2022 - I guess I am not tracking the issue.  Are you saying that your accountant reported the insurance proceeds as taxable income??????  why????

<<So the damages were far more than what we received from insurance, however, this was still considered a gain. >> 

are you sure about this? suggest talking to the accountant again as this statement doesn't make sense. 

Let's say you bought a home for $500,000 and the house was insured for $350,000 (the rest was the land)

A fire occurs and destroys the house.  You have replacement value insurance and the insurance company determines it is going to cost $350,000 to rebuild and they send you a check for that amount.  There is NO taxable income (yet or maybe ever)

you have up to 4 years in a declared natural disaster to spend the money received from the insurance payment. 

Scenario 1: You spend $350,000 to rebuild the home.  THere is no taxable income

Scenario 2: you spend $325,000 to rebuild the home.  $25,000 is considered taxable income.