causualty loss on rental property

[Michael Bertsch]

Let’s say the roof on your rental property gets damaged from a storm and you claim a casualty loss. At the end of the year, you have a net operating loss after depreciation and operating expenses. Can the causality loss further the loss and can it be carried over to reduce W2 income (person meets passive loss rules)? If not, will it have to be carried over to the next year?

[Ashish Acharya]

@Michael Bertsch , 

A deduction against your rental income is permitted for any casualty loss sustained during the tax year not compensated for by insurance or otherwise. 

So the loss claimed is going increase your loss as you mention above. 

The passive activity loss (PAL) rules do not apply to casualty losses sustained in a passive activity unless losses that are similar in cause and severity occur regularly in the activity. 

If income from an unexpected insurance reimbursement is reported in a year after a casualty loss has been treated as nonpassive under this rule, the income is also treated as nonpassive