Noble Public Adjusting Group always strives to use our blog to inform and educate Florida property owners about all things involving insurance. One question we get asked a lot, when a policyholder we have represented as their Florida public adjuster, is if the insurance settlement they receive is taxable. And this is a very good question. Below we have answered that question in detail:
Is Your Florida Property Insurance Settlement Taxable?
Your property insurance settlement isn’t taxable unless you have a gain from it. The gain is determined by comparing the proceeds of your Florida property insurance settlement to the cost of your property. Suppose your Florida home cost $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 certain 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. 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 any way we can. If you have a loss at your Florida property, whether as a homeowner or commercial property owner, you really need a Florida public adjuster to handle that 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.
Noble’s home office is in Panama City Beach, but we have several other offices in Florida and can handle an insurance claim anywhere in the state. We also have offices in Texas and Georgia. Under the right circumstances, Noble can take on a property insurance claim anywhere in the US. So make sure to tell your friends across the nation that they should hire Noble Public Adjusting Group if they have a major loss at their home or commercial property.
Give Noble a call today and let’s get acquainted!
Noble Public Adjusting Group
107 Amar Place Suite 103
Panama City Beach (West End), FL 32413