Updated over 7 years ago on .
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Tax implication for rental - insurance payout-work not completed
Had hail damage to rental properties in 2017. Received checks from insurance for cash value in 2017. Started to get one property repaired before winter, but it will be finished this spring. The other properties haven't been started. I know any "profits" from the insurance payout minus repairs are taxable. My question is do I have to claim the cash value checks on my 2017 taxes as income even though not all repairs have been done? I'm worried this will cause a large "increase" in income for 2017 and a large "loss/deduction" in 2018. I was thinking I was going to wait until 2018 to see what the actual loss or gain was from the insurance payout minus the repair costs and claim it then (Kind of like you would with a flip...claim all expenses in the year you sold it not in the year it was incurred). Now I'm wondering if that is right.
Not sure it matters, but another part of this is I am unable to access the "cash value" funds the insurance paid me because my bank (who has mortgages on the properties) has them "locked/froze" until the work is completed or as the work is completed). As I bring in valid receipts or invoices for work completed/supplies they will release the funds to pay off those invoices/receipts.