Question

Rental property fire question

Forum|Forum|5 years ago
July 10, 2020
1 reply
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Hi - If I stopped renting my property in June because there was a fire and they had to rebuild the home, do I put in my taxes I stopped using it as a rental property in June? Although, I did receive rental property losses from the insurance from June till the end of the year, so would it still be considered a rental for all 365 days or not?

Carl11_2

To save us both time, since the tax filing deadline is approaching, please download and read the attached word document. I wrote this document about 3 years ago. So if you suspect something may be outdated due to tax law changes then by all means, please question me about it.

J

JadeDragon64

Your word document is absolutely fantastic that answered most of my questions. At the end of the Word document, you mentioned that you would write another article to address the situation that the rental property is partially burned. Would you please share your that article?

I have a duplex that half of it was burned in July 2023 and both side became uninhabitable. While the side that was burned was still in the process of rebuilding, the other side was duplex was cleaned and have tenant moved in on December 1, 2023. The burned side of rebuilt and will have tenants move in from April 1, 2024. I am sure your other article will provide tremendous help on my situation.

J

JeanAtkinson

Yes. Assuming both were rented out and/or classified as a rental for the same time frame, you split it all, including the prior year's depreciation. But keep in mind that your restoration costs for the burned unit will be added as a physically separate asst for "that" unit, once all the work is done and it's available for rent again.

Thanks @Carl11_2, the doc and everything you wrote in this thread is super helpful!

As I see it, TurboTax is really quite weak in the way it handles this, because it does not know how to correlate losses to assets. So you end up having to re-enter everything and make them match.

Instead, in the loss section, it should let you just pick a schedule E asset, ask you for loss date and insurance payout, and manage the rest painlessly.

But with the right guidance, the more 'manual' way works, so thanks for that. 😀