This is a simple thing really ... you report the insurance reimbursement as income on the Sch E and the expenses for the repairs also on the Sch E ... this will balance off the 2 amounts. If you have more expenses then they are also deducted if they are repairs however if they are improvements they must be depreciated.
For instance ... say the kitchen cabinets/counters damaged and you repaired the damage then they are repairs due to the vandalism. However, instead of just repairing the damaged items you decide to undertake a complete kitchen remodel you would have an improvement not just a repair.
