[GNC] Are insurance proceeds income?

[GWB]

Again, no tax advice here, but I tend to look for a reporting form
that goes to some kind of governmental unit, and then I check the tax
software (I use CCH) for some checkbox or other items for "loss
payouts", "insurance loss payments", etc.  It might be something for
form 4868.  But that's not advice; it's just a fuzzy memory.

Common sense and reason would dictate that if the insurance payments
are taxable, then the loss would be deductible.  But that might be too
rational.

So ask some kind of tax professional.  CPA's tend to be very
expensive, but you might find a tax preparation office that might have
a small fee to answer that kind of question.  I would wonder, since
insurance payouts occur due to some kind of loss, if it is reportable
only to the extent that the loss is reflected in the tax return (i.e.,
a deductible loss of inventory, rental property, etc.).

Also ask the insurance company if they have a form of some kind on
which the proceeds are reported.

If you are in the US, you could look at this page on the IRS web site:

https://www.irs.gov/newsroom/top-10-tips-for-deducting-losses-from-a-disaster

But of course it's all clear as mud.  Here's the disclaimer at the top
of that web page:

<<
This is an archival or historical document and may not reflect current
law, policies or procedures.
>>

That page also links to form 4868 and schedule A.

I would go ask a tax preparation office, and see if they can advise
you for a fee.  In the US, they won't give you an "opinion", because
that is considered a "covered opinion" in IRS lingo.  So all you want
is just a little advice.

Gordon

On Mon, Sep 16, 2019 at 9:39 PM Stephen M. Butler <kg7je at arrl.net> wrote:
>
> On 9/16/19 5:38 PM, ornd25 at tutanota.com wrote:
> > Are insurance proceeds income? If not, how do you characterize an insurance payout when they send you a check?
>
> The real question is "Is it taxable?" to which the answer varies
> according to your taxing authority.
>
>
> I have always considered it "income" but I know of others who think it
> is a "return of premiums paid".  Certainly it is also an offset against
> a "loss".
>
> >
> > I've seen a reference online to using accounts receivable against lowered value of inventory, but that approach doesn't seem to apply to a homeowner who has storm damage or a fire.
> >
>
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