Typically, all income received from any source for any reason, for rental property can be reported as rental income. It’s reportable and potentially taxable as such, because all the insurance premiums you paid were a tax deductible business expense. However:

For an insurance payout you typically reduce your cost basis by the value of the loss, then increase the cost basis by the cost of the restoration. So it’s possible for those two equations to zero each other out, resulting in no change.

Now, if the property was not habitable between the time the damage occurred and the time the repairs were completed, *and* your insurance payout included an amount for “loss of rent”, that amount is definitely reportable as rental income, since the insurance company paid you rent for the period of time it was not habitable.

Now I’m sure you had a deductible which you had to pay. But, if the cost of repairs cost less than the insurance payout, then any excess insurance money would be reported as rental income.  While possible, I don’t see that being your case, so will not discuss that any further.

Assuming the cost of restoring the property to it’s condition prior to the event that damaged it does not cause a change in your cost basis (meaning the insurance covered the cost 100% with nothing out of your pocket) you really don’t need to report anything concerning the event on your tax return, other than any “loss of rents” the insurance company paid.

However, if you did have to pay anything out of your pocket for the restoration, that would add to your cost basis of the property. You can just enter that amount as an asset and call it something like “new roof/siding” or whatever, classify it as residential rental real estate and start depreciating it over the next 27.5 years.

There would really be no need to report the insurance payout since the reduction in cost basis was offset by the restoration paid for by the insurance company.

Just keep in mind that any portion of the payout that is designated by the insurance company as payment for “loss of rents” is included in the total rental income received for the tax year regardless of what you may have actually used that money for.  Typically, insurance will pay up to 85% of the monthly rent you were receiving from the tenant before the event, for anywhere from 6 months to a full year. It just depends on the policy.

You do not report this on your return. This would not be taxable income.  The payout from an insurance policy that you are paying for only becomes taxable income when it results in you being in a better financial situation than you started.  So, even if you didn’t replace the roof, your roof had damage (currently in the amount the insurance company assesses it to be with the check they sent you).  So at this point, you have been made whole.  You do not have a gain in your overall asset/wealth.  So you would not report the payment on your taxes at all this year.

If they paid you more than the roof was worth, then you would have a gain for the amount they “increased your wealth” and only that part would be taxable.