Hi, I have received an insurance payout for an Air-conditioner indoor and outdoor motor after a short circuit to our rental property. It was burnt and not repairable or not worth repairing, so the insurance company decided to replace the both the indoor and outdoor unit. The cost of this was $8,500 which the insurance company paid directly to me, and I paid $600 as the excess fee. My understanding is to include the insurance payment $8,500 as income and excess fee $600 as expense.
How about the payout $8,500? Can I claim it as an expense because it was just for the replacement of the indoor/outdoor unit and not the replacement of the entire airconditioner system. The replace was like for like. Or does this need to be depreciated and the deduction received over a number of tax years.
If I claim the item as a depreciated item, estimated depreciation will be about $800 only for this year, then I have a net income of $7700 ($8500-$800), which I need to pay income tax, however in fact I do not really have any income.
Please let me know if you need any more information to give me a clear answer.
Thanks.
991 views
3 replies