HO Insurance Loss

[Ysocirrus]

I had a damage loss to my primary residence in September 2022 due to hurricane Ian.  I didn’t settle the claim with my HO insurance company until December of 2023, and they did not issue payment to me until January of 2024. 

The rough #s are:

$90k in losses, I paid for out of pocket.

$13k deductible. $77k settlement ($25k paid to my attorney. $52k reimbursed to me by HO company.)

• Can I write off the $38k in losses that were not covered by insurance, including the deductible and attorneys fees I paid to resolve the claim? What about interest losses? 
• In what year can I deduct this loss?  Should I do it for 2023 because that’s when the loss was realized and the agreement was finalized, or can I wait until the 2024 season because that’s when I will be partially reimbursed?  

[RobertB4444]

The way to figure your disaster loss is to figure out what the Fair Market Value of the property was before the hurricane (you can use the tax value or sales of similar properties at the time.  Then you figure out the Fair Market Value of the home after the hurricane BEFORE you made the repairs.  That should be on your insurance report.  The Fair Market Value should be adjusted to include furniture and possessions.  The difference is your disaster loss.

Then you deduct from that your insurance reimbursement.  Attorney fees are not an allowed disaster deduction so I'm not sure whether you should enter your insurance reimbursement as $77,000 or as $52,000.  It honestly depends on how the paperwork from the insurance company was worded.  If they paid all the money to you and then you paid the attorneys that's not deductible.  If they paid the attorneys directly as part of the settlement then an argument can certainly be made that you were only paid $52,000.  You may want to consult an attorney or tax professional on that one.

The remaining amount after the reimbursement is taken out is your deduction.  There are some limits on the deduction amount.  Here is the IRS publication on disaster loss.

Sorry for all your hassles.

@Ysocirrus