OK. I thought I would start another topic, since this has an additional question that I didn’t ask about in my previous post… I have done more research, and since the costs of things have skyrocketed, the cost of my hurricane losses will be higher than I had thought. In my previous post, due to the standard deduction, and my minimal things I would normallly itemize, I was going to be right on the edge of whether my itemizations would matter. Well, after gettiong a few bids, my hurricane losses will definitely matter on my tax return. So, here is something I am confused about – My losses will of course, be offset by the amount of money I receive from my insurance company. I have already received a check from our homeowner’s insurance company – I have not cashed it or deposited it. It is good for 180 days. With our hurricane occurring, it may be months before I can have some of my repairs done - taking me into next year. So, here is my question – do I delay depositing this check, until next year, when the repairs will be done? I would not want to cash it in this year (2022) if my repairs are not done (and paid for) until 2023, right?? I am sure I can revise my tax return or something, but seeing as how I am on the edge with itemizing and claiming these hurricane losses in one year, I am thinking it might make sense to deposit this check in the same tax year as the monies are spent on the repairs. Right? – Since I can easily get above the standard deduction in one tax year, but probably not 2 consecutive years. If I split my hurricane losses between 2 tax years, I will be very borderline on the itemized deductions and getting above the standard deduction… I hope that makes sense. Thanks again for your sage advice on this board.
–Footsox
The only costs that are deductible are costs that won’t be reimbursed by the insurance company. You don’t get to double dip by both taking a deduction and being reimbursed. So, re-figure your losses to see if they really will be above your standard deduction after your insurance company reimburses you.
AJ
Getting off into the weeds a bit, your loss is not actually the cost of repairs. It is the decline in FMV of the assets damaged in the storm. When you complete the form to claim the loss, the questions asked are the FMV of the property before and after the casualty.
You do not actually need to do the repairs to claim the loss on your tax return. Granted, it’s usually a good argument to make that the loss in FMV is the cost of repairs. A buyer would typically discount the price they are willing to pay for any asset by the cost of needed repairs.
And the loss happened when the storm happened. That is the year you claim the loss on your tax return. The timing of the repairs and any insurance reimbursement is not relevant. They can happen in a different tax year from the loss with no impact on the tax deduction.
So I would go ahead and deposit the insurance check. The timing of the deposit has no bearing on the loss deduction.
–Peter
Great. Thank you so much. That makes sense. I was worried about depositing the check in the same tax year as the losses. Thanks for explaining that it doesn’t matter. One less thing to think about. I think in our area, since the hurricane, people are waiting months and months for a new fence or roof, so I will just wait and hope, and not worry about taxes… Thanks for the clarification.
-Footsox