No. I am assuming you are filing form 4684. The amount of your casualty loss is the lower of $150k paid or $250k value. You are correct the basis is $150k - unless you had improvements to the property. Any improvements over 30 years of ownership need to be accounted for. A fence, some trees, a new porch, etc.
Insurance paid you $300k. The difference is $150k. However, you made a comment that your damage was $250,000. Therefore, you actually only received $50,000 as gain. Unless, you used all of it for actual repairs to return the home to what you had before the damage. In the beginning, you said all of it is going to repairs, this would mean nothing taxable.
The IRS is looking to tax the increase in your wealth, not maintaining what you had prior to the fire. Instead of you having a $400k basis with the improvements, it maintains the basis prior to the fire, $150k.
Form 4684 instructions state:
Don't report the gain on damaged, destroyed, or stolen property if you receive property that is similar or related to it in service or use. Your basis in the new property is the same as your basis in the old property.
This means, your depreciation of the rental will remain as it has been. Nothing changed on your rental house sch E. You won't deduct the improvement or change the basis.
IRS pub 525 states:
Casualty insurance and other reimbursements.
You generally shouldn't report these reimbursements on your return unless you're figuring gain or loss from the casualty or theft. See Pub. 547.
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