First, if you had a loss (such as your insurance deductible), you can take the casualty loss deduction even if you take the standard deduction. But you don't have to report your loss if you don't want to, and it sounds like you might not even have a loss.
Leftover money may be taxable. It's a bit complicated. We also have to think about your cost basis.
Cost basis is the amount of after-tax money invested in the home. Your cost basis before the hurricane includes the purchase price, plus the cost of any permanent improvements you made to the property, minus any depreciation that you claimed for prior business use of the property such as a home office deduction.
Start by calculating the cost basis of your property before the hurricane. Subtract the insurance reimbursement and your deductible. Then add back the cost you actually paid for the repairs. That is your new cost basis.
For example, suppose your cost basis was $200,000. Insurance estimated the damage at $50,000 and paid you $48,000 after a $2000 deductible. You were able to repair the property for $40,000 with $8,000 left over.
Your new cost basis is
$200,000
minus $50,000
plus $40,000
equals $190,000.
The leftover cash is not taxable at this time. However, because your cost basis is reduced, more of the sales price will be a taxable capital gains whenever you sell.
Keep records of your cost basis adjustments for as long as you own the house, plus 3 years after you sell. You will need those records if audited and to calculate your taxable capital gains when you sell.
