No, but you reduce your basis in the property.
(This applies to personal property. If this is a rental or commercial property, we will have to re-think the answers.)
Suppose you bought the property for $200,000. If you have a loss of value of $75,000 that you are compensated for, the $75,000 is not taxable income, but it reduces your basis in the property, which will affect your capital gains when you sell.
Then, you renovate the roof for $50,000. That's a property improvement that increases the cost basis.
So at the end of it all, your new basis is $175,000, which will result in a larger capital gain, and possibly higher capital gains taxes, when you sell.
The only time the $75,000 would be taxable is if the original basis in the property was less than $75,000. If the basis was $60,000, then the payment reduces your basis to zero and you pay tax on $15,000. Then you invest $50,000 in the repair, so your new basis is $50,000.
