I received a settlement for damage to my property. I used a good amount of the proceeds for repairs. Is the entire settlement taxable? Can I deduct the cost of repairs?

[AggieGal]

I received proceeds from a lawsuit for damage done to my property. I used a good amount of the proceeds to repair my property and a good chunk for attorney's fees. Is the entire amount taxable to me? Can I deduct the cost of the repairs? Can I deduct my attorney's fees?

[Tiki]

The taxable amounts received will depend on how the lawsuit proceeds were labeled. If the proceeds were given solely to compensate you for property damage,  that is not taxable income and you will enter the amount on line 21 of your return and then take it out as a negative to show the IRS. If part was DESIGNATED as attorneys fees those are taxable

To enter the proceeds, if they are taxable, you will enter them in the Miscellaneous income section. 

1. Click Federal Taxes tab (Personal in Home & Business)
2. Select Wages & Income
3. Scroll Down to Miscellaneous Income
4. Click Start or Update
5. On the next screen, scroll down and click Start next to Other Taxable Income
6. Answer the questions regarding the settlement.
7. When the software asks for the amount, enter the number with the minus sign before the amount as shown in the image below. 

[lananaida]

Hi,

My tenant damaged that property( flooded the basement by leaving water running in upstairs bathroom). My insurance company reimbursed for the damage. Should include the reimbursement amount as income? Should I report the repairs? 

Thank you

[lananaida]

Please advise if insurance reimbursement for damage to investment property taxable.

Thanks 

[jjball4110]

When trying to enter the amount with a (-) I get a "red alert" that the amount must be at least $1

[ReneeM7122]

Yes, the settlement is considered taxable income unless it is for pain and suffering due to bodily or psychological injury. 

Here is an IRS link about the taxability of settlements.

@jjball4110

[Carl]

With the exception of "pain and suffering" (of which I don't see any of that here), all rental income received for rental property from any source for any reason, is included in the total of all rental income received for the tax year. So it gets included with the amount in the rental income section.

The taxability of that income can be offset by the 'qualified" rental expenses it was used to pay for.

You'll claim your legal fees for this in the rental expenses section in the Miscellaneous Expenses section, which is the very last screen of the rental expenses section. Simply label your legal fees as "legal fees" since that is what they are. Enter the amount, and press on.

[st1963]

I received a settlement for damages to my fruit trees I planted on my property. Is it considered taxable income?

[JotikaT2]

It depends upon the type of legal settlement.

Please see this link to help you determine if your settlement is considered taxable or not.

Based upon the review of the link above, if you determine your legal settlement is taxable, please see this link to help enter the information into TurboTax.

If the settlement you received was not due to an actual legal settlement but from an insurance claim, please comment so we can direct you accordingly.

@st1963 

[st1963]

It was a legal settlement. It was not insurance

[MonikaK1]

The taxability of a legal settlement depends on the type of settlement proceeds you received and what they represented. If you received punitive damages, that would be taxable income, and often a Form 1099 would be issued. 

Property settlements that compensate you for a loss in the value of your property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. 

However, you must reduce your basis in the property by the amount of the settlement. If the property settlement exceeds your adjusted basis in the property, the excess is income. 

See IRS Publication 4345 for more information.