26 U.S.C. § 123 — Amounts received under insurance contracts for certain living expenses

This section excludes certain insurance payments for temporary living expenses from taxable income. (a) General rule. If an individual's principal home is damaged or destroyed by fire, storm, or other casualty, or the individual is denied access to it by the government because such a casualty happened or threatened to happen, gross income does not include amounts they receive under an insurance contract to compensate or reimburse them for living expenses for themselves and their household, resulting from losing the use of that home. (b) Limitation. This exclusion only applies up to the amount by which: (1) the actual living expenses the person and household incurred during that period, because of losing use of the residence, are more than (2) the normal living expenses they would have had anyway during that same period. In other words, only the extra living cost caused by the loss is excluded — not ordinary expenses they'd have paid regardless.