The loss of your old home and the purchase of the new home are two separate events. Basically, you might be able to claim a casualty loss deduction for part of the loss on your old home on your 2016 tax return. You do not report the purchase of a new home on your tax return. The amount you received from the insurance will reduce your casualty loss deduction. You can only claim the loss that was not reimbursed by insurance.
There are a lot of limitations on the casualty loss deduction. First of all, the loss that you can claim on your tax return is the decrease in value as a result of the fire, minus the amount of the insurance reimbursement. If the entire house and contents were completely destroyed, the value after the fire would be zero, so the loss is the value of the house and contents (but not the land) before the fire. If your insurance paid the full value of whatever was destroyed, you might not have any deduction at all, or only the amount of your deductible.
In calculating the deduction for a casualty loss, you first have to subtract $100 from the unreimbursed amount of the loss. Then you have to subtract 10% of your Adjusted Gross Income (AGI). What's left after those subtractions is the amount you can deduct.
If you still have something to deduct, a casualty loss is an itemized deduction. To get any tax benefit from the deduction, your total itemized deductions, including the deductible portion of the casualty loss, have to be more than your standard deduction.
If you think you can take a deduction for the casualty loss, see IRS Publication 547 for more details about the deduction. You can download Pub. 547 from the following link.
http://www.irs.gov/pub/irs-pdf/p547.pdf
Here's how to enter a casualty loss in TurboTax.
- Click the Federal Taxes tab.
- Click Deductions & Credits.
- Click "I'll choose what I work on" or "Jump to a full list."
- On the screen "Your 2016 Deductions & Credits," scroll all the way down to the last section, "Other Deductions and Credits."
- Click the Start, Update, or Revisit button for Casualties and Thefts.
