Gains Realized on Homes in Disaster Areas

The following rules apply if your main home was located in an area declared by the President of the United States to warrant federal assistance as the result of a disaster, and the home or any of its contents were damaged or destroyed due to the disaster. These rules also apply to renters who receive insurance proceeds for damaged or destroyed property in a rented home that is their main home.

1. No gain is recognized on any insurance proceeds received for unscheduled personal property that was part of the contents of the home.

2. Any other insurance proceeds you receive for the home or its contents are treated as received for a single item of property, and any replacement property you purchase that is similar or related in service or use to the home or its contents is treated as similar or related in service or use to that single item of property. Therefore, you can choose to recognize gain only to the extent the insurance proceeds treated as received for that single item of property exceed the cost of the replacement property.

3. If you choose to postpone any gain from the receipt of insurance or other reimbursement for your main home or any of its contents, the period in which you must purchase replacement property is extended until 4 years after the end of the first tax year in which any part of the gain is realized.

For details on how to postpone gain, see Pub. 547.

Example. Your main home and its contents were completely destroyed in 2025 by a tornado in a federally declared disaster area. In 2025, you received insurance proceeds of $200,000 for the home, $25,000 for unscheduled personal property in your home, $5,000 for jewelry, and $10,000 for a stamp collection.

No gain is recognized on the $25,000 of insurance proceeds you received for the unscheduled personal property.

Instructions for Form 4684 (2025) 5

The jewelry and stamp collection were kept in your home and were scheduled property on your insurance policy. Your home and its replacement contents are considered a single item of property for the purpose of recognizing gain on the involuntary conversion of your home and its contents.

Qualified wildfire relief payments include any amount you receive for losses, expenses, or damages, including compensation for:

If you reinvest $215,000 in a replacement home and its replacement contents, you can elect to postpone any gain on your home, jewelry, or stamp collection.

You cannot take a credit or deduction, or increase the basis in your property, related to any expense for which you were compensated by a qualified wildfire relief payment.

• Additional living expenses,

• Lost wages (other than compensation paid by an employer who would have otherwise paid your wages),

• Personal injury or death, or

• Emotional distress.

If you reinvest less than the remaining $215,000 of insurance proceeds in a replacement home and its replacement contents, you may have to recognize any gain to the extent the $215,000 of insurance proceeds exceeds the amount you invest in a replacement home and its replacement contents.

See Pub. 523, Selling Your Home, for more information on gain that may be excluded on a sale, including the receipt of insurance proceeds for a destruction of your home. Also see Pub. 547 for more information on rules for postponing gain, including rules for when the main home is located in a disaster area.

To postpone the gain, you must purchase the replacement property before 2030. Your basis in the replacement property equals its cost decreased by the amount of any postponed gain.