Is Your Florida Property Insurance Settlement Taxable? – Insurance Claim FAQ

Your property insurance settlement is NOT taxable unless you have a gain from it. The gain is determined by comparing the proceeds of your Florida property insurance claim  settlement to the cost of your property and also applies nationwide. Suppose your Florida home costs $150,000 and your gain on the receipt of the insurance settlement money is $50,000. If you use all the proceeds to fix your home (within a specific time period), you would have no gain or loss.

If you use less than the entire reimbursement, you have a reportable capital gain to the extent of the lesser of the unspent proceeds. The reportable gain may be deferred if the property destroyed was the main home that you lived in for two of the last five years. The time period for reinvesting the proceeds in repairs is two years from the close of the tax year you had the gain.

The below information from Insurance Q & A explains in detail why you do not have to pay taxes on an insurance settlement for property loss:

“One basic underlying principle of property insurance is the principle of indemnification or payment to cover your loss. Insurance aims to protect you from a loss. With respect to homeowners insurance, you can expect protection from losses you will incur due to a covered peril such as a fire, a windstorm or hailstorm [or roof damage]. With the principle of indemnification, you are not expected to profit from the insurance. What is being paid is just a reimbursement of what you lost.

That means if you lost a television, the insurance will pay for the television. In some cases, the amount you receive may even be smaller since depreciation is also taken into account. You will also have to pay the deductible. This means that the insurance proceeds are usually not required for reporting to the IRS. If you used the money paid by the insurance company to rebuild your house or replace the contents that were lost, then you don’t need to report what you received as taxable income.”

Noble Public Adjusting Group hopes the above answers to the question of whether you have to pay taxes on a Florida property insurance settlement to your satisfaction. However, if you have further questions about this issue, don’t hesitate to call us. We love hearing from our blog readers, and we will help you in any way we can. If you have a loss at your Florida property, whether as a homeowner or commercial property owner, you need a public adjuster to handle the claim for you, and with very good reason. 

A recent study shows that by using a public adjuster to handle their insurance claim, policyholders receive 747% more of a settlement than when they handle it themselves.