What was the basis in your property before the casualty loss? The Fair Market Value? Was it a federally declared disaster? These factors may influence the taxable income from this event.
According to IRS Pub 527 Rental Properties - Casualties and Thefts: "...you may defer paying tax by choosing to postpone reporting the gain. To do this, you must generally buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Pub. 547 for more information.
The cost of the replacement property must be equal to or more than the net insurance or other payment you received."
Since you don't plan on spending more than the insurance reimbursement, based on the information you provided, you cannot postpone the gain.
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