How to Handle Insurance Claim on Rental Property Taxes

[krichards22]

This past summer I had hail damage to my rental property. I received an insurance claim payout to cover the damage to roof, gutters, paint/siding, etc. minus my 5k deductible. So far, only the roof and gutters have been replaced.

I am uncertain of how to handle this on my taxes, specifically I am not sure where this information gets placed. Do I need to fill out form 4684 section B?

Or do I need to capture the roof replacement on my schedule E as an improvement? If so, would the cost of the improvement just be the portion of my deductible for the roof since insurance paid for it?

Also, I am wondering if it would be acceptable to not include this event anywhere on taxes and not take a loss? This seems easiest to me, but I am not sure if it can be handled that way.

[MarilynG1]

You could just claim your deductible as a Repair Expense on Schedule E.   Or, you could depreciate your deductible as an Improvement, as you suggested, though this technically reduces your Cost Basis in the property. 

Or, you could claim a Casualty Loss on Form 4684.  The FMV before the event would be the amount the insurance reimbursed you, plus your deductible. The FMV after the event is $0.  You report the amount the insurance paid you, and in essence you are claiming an Itemized Deduction on Schedule A for your deductible amount. 

Here's more info on Reporting a Casualty Loss.