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Real Estate Investing Forums | Real Estate Investing | Asset Protection, Legal and Contract Issues, Income Taxes, 1031 Exchanges (Moderators: $Cash$, Bluemoon06, kdhastedt, Mdhaas) | Topic: Tips for those with storm damage
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mcwagner
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« on: September 12, 2017, 05:42:29 PM »

Tips for those with storm damage to rental properties.

#1. If you don't think you are getting a fair deal from the insurance company, consider hiring a private adjuster to do battle with the insurance company.  You will almost always come out ahead.  They know things you don't know you don't know.

# everything else.

Insurance proceeds are not income unless you get more from the insurance company than it costs you to make the repair.  You should track what you spend and compare it to the insurance check.  Ideally they come out exactly the same.  If you spend more, it's a deduction.  If you have money left over, report it as income.  Keep your records. 

Money you pay out for your deductible goes in the bucket with whatever else you pay out.  If you get a deal from the roofing company so you don't pay a deductible, then sorry, you don't get to claim it.  You can only count cash out of pocket.

Things like roofs and decks that are depreciated will need to be booked through the depreciation.  For example, you will write off the full undepreciated balance of the old roof on the current year return, and then add the new roof to new depreciation.  Same with carpet, appliances, anything on the depreciation schedule.  Less than 50% new roof is a repair; more than 50% is a replacement.

If you have a total loss, then things get a little more complicated.  You would have to treat the loss as a "disposition" of that part of the asset.  For example, you would have to "dispose" of the building (but not the land and maybe the foundation) and recognize a gain/loss as if you had sold it with the insurance proceeds treated as the "sale" price.  Then you would rebuild with cash in hand, and book the new construction as a new asset.  Or you could sell the land and just walk away and keep the cash.  Did that make sense?

There have been a lot of property damages from Harvey and Irma, including some of my clients and forum members.  My thoughts and prayers are with you.  Don't hesitate to ask if you need help with this stuff.

Also, if you are a victim of the disasters, you can request more time to file your tax return (even for 2016 if not filed yet) if your records were lost or damaged.


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Mark Wagner, CPA, LLC
Certified Public Accountant
http://www.facebook.com/MarkCWagnerCPA
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Real Estate Investing Forums | Real Estate Investing | Asset Protection, Legal and Contract Issues, Income Taxes, 1031 Exchanges (Moderators: $Cash$, Bluemoon06, kdhastedt, Mdhaas) | Topic: Tips for those with storm damage
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