insurance claim/income tax question?

[mrs jam]

I have a question about how my Chubb insurance claim money will affect my income taxes. I lost my engagement ring while traveling earlier this year, filed a claim with Chubb and recieved a check for the replacement value. I banked the money and since my husband and I have separated and appear to be headed toward a divorce unless a miracle occurs, I don''t intend on using the money to purchase a new stone. I''ve never filed taxes on my own before and was planning on using the turbotax website when the time comes. Can anyone tell me if they know if/how you have to pay taxes on insurance payouts?

Thank you.

 

[AndyRosse]

Mrs Jam, I can''t be of much help about the insurance/tax question, but I just wanted to tell you how sorry I am about both your lost e-ring and your separation. I wish you the best, and I''m sure someone here is bound to be able to answer your question!

 

[mrssalvo]

mrs Jam, I can''t answer your tax question either, I''m sure Rock Doc would know if he see''s this or any PS accountants but I did want to wish you well and I''m very sorry...

 

[Dee*Jay]

Mrs. Jam - I''m very sorry to hear of your current situation.

To answer your question; if I recall correctly insurance payouts based on loss and/or damage claims are not taxable. The insurance company is simply giving you $ back for something that you''ve spent $ on in the first place, you have not earned or made any $.

I can''t find the reference that I''m looking for at the moment (AND PLEASE DO NOT RELY ON MY POSSIBLY FAULTY RECOLLECTION AS ANY SORT OF TAX ADVICE), but as Mrs. S. said Roc Doc should be able to help you. Hopefully he will check this thread.

 

[mrs jam]

Thank you all for your replies and well wishes. That makes sense that I would not have to pay taxes on the payout, but I''m sure I will on the interest that the money has earned while sitting in my savings account (which is extremely minute, thank goodness!) Thanks so much!

 

[Skippy123]

It is income but you are right about the interest.

If you go to the IRS site http://www.irs.gov/pub/irs-pdf/p17.pdf
look at filing, and income sections of the publication 17; that should point you in the right direction.
I am an accountant, but I don't do taxes for a living; I actually audit. I hope that helps you.

I am so sorry about your seperation; Happy New year and hopefully it will be filled with positives in 2007.

 

[Dee*Jay]

Skippy - do you mean the *insurance payout* is income or the *interest* that has been earned on the payout is income (or both)?

 

[Mara]

mrs jam, have no advice to give on the income tax but i am sorry to hear about your e-ring (the beautiful K??) and also the separation from your husband, i hope that you two can work things out...miracles ARE out there!! take care and happy new year.

 

[Skippy123]

I guess what I am saying is that I would not worry about it unless you used it toward investments where you are making money. Sorry, and I hope that helps.