If you collected an insurance claim you would only be able to collect your out of pocket (ie deductible).

Also, since you never gave the keys for possession, highly unlikely a judge will even allow you to deduct per diem rent from the SD.After losing a couple of court cases on scenarios similar to yours, we huddled with our attorneys, who recommended charging a Holding Fee.We have a Holding Fee Agreement we require prospects to sign to hold a property until they later sign a lease.

Or do I still complete the 1031 exchange for the full $2.5MM, with the $500K deduction only reducing the deferred tax owed?

Tax ConsiderationsSTR income is taxed higher than LTR, but deductible expenses (e.g., repairs, furnishings) can offset this.

And they’ll have to declare that interest on their taxes (Though the kids can then deduct it from their taxes.)

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.

Still, if you want to be able to deduct your expenses before paying taxes in Mexico, you can always do so by investing through a Mexican corporation instead of a fideicomiso.Seen from my side and as I mentioned earlier, the issue would be that the ROI in Cancun specifically is too low, although 9% would be considered great by many people.

Section 179 of the Internal Revenue Code allows businesses to deduct the full purchase price of qualifying equipment and software up to an annual limit.In 2024, for example, taxpayers can expense up to $1,220,000 of qualified assets.This election can apply to many types of tangible personal property, such as machinery, equipment, and off-the-shelf software, which are used predominantly in your business.Limits on Section 179 ExpensingAs attractive as Section 179 may seem, there are limits.For tax year 2024, the maximum investment limit is set at $3,050,000.If your business places more than this amount in service, the amount you can expense is reduced dollar-for-dollar over this threshold.In addition to the dollar and investment limits, the amount of your Section 179 deduction cannot exceed your taxable business income for the year.This means that even if your business invests heavily in qualified property, the deduction could be limited by the business’s profitability.Also, not all property qualifies for Section 179.Real property, like buildings and structural components, generally does not qualify unless it is "qualified improvement property."

RCV: $244,000AOP Deductible: $4,000Hurricane Deductible: 2%Liability: $500,000If I remember right, steadily quoted me around $4,000 for the same property so you may be able to find something a bit better depending where in Alabama you are. 

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.