Do you have to report as a gain insurance claim proceeds that exceed repair costs in one year but won’t be finished until the next?

by Ashley N. Blessing, CPA | Jan 03, 2019

Say you receive proceeds from an insurance claim in 2017, but the proceeds exceed the repair costs incurred in 2017 but the repairs will not be completed until 2018. Do you have to report a gain or income, or can it be deferred until the repairs are completed?

In short, if the repair work straddles a year-end, you may defer the insurance proceeds received. Depending on what property was damaged and the net book value of the asset, you may have to recognize a gain if there are insurance proceeds in excess of the cost to repair. It is advisable to communicate with your CPA to understand the treatment of the proceeds in terms of adjusting the basis of the depreciable property affected by the damage.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Ashley N. Blessing, CPA, is a supervisor with Herbein + Company Inc. in Reading, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.