If the insurance payout was less than...or equal to....the cost of repairs it's not necessary to report the payout as income at all
That's another route to go, meaning that you would not claim the cost of repairs either - except for cost in excess of the insurance payout.
do NOT include lost rental income.
Fairly standard in FL where I"m at. I know all my policies cover up to 85% of lost rental income for a maximum period of 6 months. Now I've only talked to other rental owners in my area, and they all acknowledge there's a "loss of rental income" clause in their policies. Keep in mind that the "loss of rent" payout is not applicable in all situations either. I don't know if it would apply to a situation of broken water pipes. It might not for all I know. But I do know it does apply in case of major fire damage making the property uninhabitable.
