Insurance Claim and Depreciation Calculation for Rental Property Roof Replacement

Hi, I have a question. If my rental property needs a roof replacement due to a hailstorm, and my insurance deductible is $5k with the total claim amount being $20k, the insurance will pay me $15k. I will then pay the roofer $20k to complete the job.

Is the $15k that the insurance pays me considered taxable income? If not, how much should I account for in depreciation—$5k or $20k?

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Let me know if you'd like any further adjustments!

posted

The 15K insurance claim is not taxable income. Since you will be paying 20K for the new roof then you can only depreciate the roof at 5K since that is your out of pocket cost for the roof.