We were paid a check of about $2000.00 from auto insurance company.Does this have to be reported on tax return
Question:
Answer:
No, it is basically the same as selling your pesonal vehicle and/or replacing a loss for $2000, and is not considered income (at least to my knowledge of the states I've lived in).
It's not income. It is a replacement for a loss. If your house burned down and you received an insurance check for $300,000, does this mean you made $300,000 in one month? Imagine the tax rate on that. You'd have nothing left. Insurance proceeds generally are not income unless they contain an interest element.
If the insurance proceeds included any interest, then the interest part would be a taxable item. For example, life insurance proceeds paid upon the death of an insured are tax exempt and do not have to be reported. However, any interest you received would be taxable and must be reported like any interest income.
Proceeds from an insurance policy paid because of the death of the insured are generally excludable from the beneficiary's gross income for tax purposes. (IRC Sec. 101(a)(1).)
no
More Questions & Answers...