Insurance payout on repairs count as rental income?

Question

I cant find this exactly on the IRS pages, but I have read on some sites that I may have to claim the insurance payment, as rental income, and then the entire cost of the repairs add to normal repair on schedule E. Is this correct? This is my first time doing my taxes with this situation.

A property had a flood (internal 1000 gallon holding tank), the total cost was just under 7000 for repairs, I had a 1K deductible so that is all I had to put in to get it fixed. The insurance company cut me a check for the rest.

Steven Hamilton II · Answer

Nicholas Quinn,

Yes, the rental loss payments are treated as rental income.

Any other property damage: You must file Form 4684 in regards to any property damage. http://www.irs.gov/pub/irs-pdf/f4684.pdf

-Steven

Steven Hamilton II · Answer

If the property was entirely made whole by insurance then yes you can disgregard the payout; however, if you still incurred some costs because insurance only covered a portion you must file Form 4684 as I posted above.

-Steven

Dave Toelkes · Answer

I had a similar situation.  Plumbing issue caused water damage.  I filed an insurance claim.  After $1000 deductible, insurance paid the balance of the restoration cost.

To keep it simple, I just took a $1000 repair expense on Schedule E (since that was my out of pocket cost) and ignored the portion of the actual cost to restore my property that was reimbursed by the insurance company.

Joe Bertolino · Answer

They are likely referring to the business income/loss of rents portion of the claim.  Standard flood policies through the NFIP do not include loss of rents so you likely have nothing to report.

Insurance payout on repairs count as rental income?

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