Submitted By: someone
Answered: October 6, 2019 10:47 pm

What is the time limit for replacing property destroyed by a casualty in order to avoid gain?

When you have a casualty event and receive insurance reimbursements that are greater than your adjusted basis in the property, for tax purposes you have a gain (even though you may feel like you’ve suffered a financial loss). Gain can be deferred by timely reinvesting the insurance proceeds in replacement property. There are different time limits for different types of property. In the case of a principal residence damaged in a federally-declared disaster area, the replacement period is four years.

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Tax Glossary

Adjusted gross income (AGI)

Gross income less allowable adjustments, such as IRA, alimony, and Keogh deductions. AGI determines whether various tax benefits are phased out, such as personal exemptions, itemized deductions, and the rental loss allowance and modified adjusted gross income (MAGI).

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