I wasn't sure if the right thing to do is to claim the insurance payout as income and also claim the repair of cost incurred or to just deduct the amount insurance paid against the replaced roof ($15K for roof vs $4K for roof)? Does make a difference here as the roof is depreciated over time.
The insurance payout is claimed/reported as rental income in the tax year you receive it. Period. So if you only received a partial payout in 2020, then that's all you report on the 2020 tax return. Now "on paper" as far as taxes are concerned, this has nothing to do with your repair and property improvement costs. Rental income is rental income, regardless of where it comes from and/or who or what entity pays it.
Your repair costs are claimed as such in the tax year you actually pay those costs.
Your property improvement costs (such as the new roof) are claimed/reported in the tax year the property improvement is completed and actually placed "in service" as a rental asset. Typically, if the property is already classified as a rental, your new roof will be placed in service either the day of completion, or one day after the work is completed.
Now depending on where the property is and the laws of the state or county that property is in, you may be required to get a CO (Certificate of Occupancy) once the work is completed. The contractor usually takes care of this and doesn't bother you with the details. This is not common for something like a new roof. But the requirement for a CO may exist in some locales for all I know. In that case, the property improvement can not be placed in service until the date the CO is issued. If such a requirement exists in your locale, the contractor typically provides you the CO when they present you the final bill.
