The Napa and Sonoma fires have destroyed thousands of properties. Most homeowners’ insurance policies include coverage for living expenses, such as rent and food. This post addresses the tax ramifications of such payments.
Unless the loss occurred in a federally declared disaster area, if the living expense insurance payments are more than the temporary increase in your living expenses, the excess is taxable as ordinary income. This rule can best be explained by means of an example. Assume your normal living expenses (rent and food) are $1,000 per month. As a result of a fire, you are forced to move into a hotel and your living expenses (hotel and food out) are $2,500. The difference between your normal living expenses and your actual living expenses is $1,500. This is called your temporary increase in living expenses. If you receive $2,000 from your insurer for living expense, you would have $500 in income. This is the difference between the insurance proceeds received ($2,000) and the temporary increase in living expenses ($1,500).
2 Comments
11/6/2019 06:00:07 am
https://www.altheqa-eg.com/stone-prices/
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8/17/2020 08:15:06 am
I have to say, when it comes to this, I thought, quite interesting to read, to see this text. Hath pleased them with the matter. . .
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blogHi. I'm Stephen Flynn. Attorney and founder of the Law Offices of Stephen M. Flynn. This is my blog. Enjoy! Archives
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