Insurance claim & Taxes

[Chris Fusco]

Hello,

Just finished my 2022 taxes but it made me realize I have a situation for 2023 taxes that I don't know how I'm going to handle. Here's the situation:

- Had a pipe freeze during a cold snap, led to fairly extensive damage during the thaw (ceiling collapsed in 3 rooms)

- Filed insurance claim, was covered

- Have a contractor that wants me to buy 3 other properties from him, so he fixed it for me at cost

- Deductible is $5K

- Actually ended up making money somehow

Math:

   - Cost from contractor $22K

  - Cost insurance came back with $29K

  - Deductible $5k

  - So I actually made $2k ( 29 - 5 = 24 [check] ; contractor cost 22)

My question is how to handle on taxes? Does the 22K count as expenses (or capitalized, depending on scope), Does $5K count as a loss I can write off? Do I report $2K income? 

Thank you in advance 

Chris Fusco 

[Linda Weygant]

The excess of a claim payout, less the expenses associated with fixing the damage, become an adjustment to basis of the property.