First, land is never depreciated so there will be no depreciation recapture on the land. Your basis for depreciation in the home should not have included the cost allocated to the land.
Second, you will treat this loss as a "sale", instead of a casualty loss. The insurance essentially "paid" you for the house so it will be completely "disposed".
To report this:
- With your return open in TurboTax, search for rentals and then select the Jump to link in the search result.
- Answer Yes to the question Did you have any rental or royalty income and expenses?
- When you get to Is this a rental property or royalty? select Rental property and fill out the description, address, and owner (if not already populated in the return).
- When you hit Do any of these situations apply to this property? check the Sold box along with any other boxes that may apply.
- Continue following the onscreen prompts to enter info about your rental property (you can answer "yes" to the questions about whether the house was rented all year). Eventually, you'll get to the Rental Summary screen (see screenshot below). You can report the sale in the Sale of Property/Depreciation section, along with any other pertinent info (like income and expenses)
Please comment if you need additional help with this.
