I've never had time to write up for partial damage. Basically, because the writeup would be a lot more complex based on differing levels and types of "partial damage" due to fire.
But basically, you convert the rental property to personal use effective the date of the fire. Then once it's all fixed up and placed back in service you create a "new" rental property. Keep in mind that the value of the land does not change, and since land is not depreciated that's not really a problem. There are several ways to do this. With one way, the cost basis of your "new" rental property would be:
What you originally paid for the property, plus your cost of improvements to get it back into service, minus the value of your loss, minus that percentage of your depreciation that was not a part of your loss.
Then you will start depreciation all over from year one, based on the new cost basis for the structure.
The new cost basis would include whatever insurance paid out, as well as any out-of-pocket you incurred. Typically, your out-of-pocket would include your deductible, and maybe a bit more.
