@DanielV01 TurboTax does not make it easy by any stretch of the imagination. Plus, if you have to figure things manually then you can forget about e-filing with TurboTax. What one could do is just leave well enough alone with existing assets. But for the $2000 deductible out of pocket paid, enter it as another asset so as to account for the "addition" to the cost basis not cancelled out (per-se) by the insurance payout.
Technically, the insurance payout is reportable income. (Doesn't mean it's taxable). But that reportable income is basically "offset" by the loss. So it's a wash in the long run.
Now there is a way to "make it work" in TurboTax where you claim the loss and claim the insurance payout. But the bottom line end result would be "about" the same. As for the $2K out of pocket in this case, on a property with a cost basis of $210,000 that's only a 0.9% addition to the cost basis. Not worth the effort in my opinion - and we all know what opinions are like.
One thing to keep in mind though, is that if you get a tax reporting document from the insurance company for the payout, then you don't really have a choice and have to include it on your tax return. While it can be done with TurboTax, it's an absolute cluster**** to make it work so one can still e-file.
