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Title 26, Internal Revenue CodeRelease 119-110

§123 Amounts Received Under Insurance Contracts for Certain Living Expenses

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter B — Computation of Taxable Income › PART III — ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME › § 123

Last updated Sep 22, 2026|Official source

Summary

It says insurance money you get to pay living costs after your main home is damaged, destroyed, or you’re blocked from going home by the government because of a fire, storm, or similar event does not count as taxable income. This covers payments that replace living expenses for you and the people who live with you. That tax break only applies up to the extra amount you actually had to spend. In other words, it’s limited to the difference between your actual living costs during that time and the normal living costs you would have had.

Full Legal Text

Title 26, §123

Internal Revenue Code, Source: USLM XML via OLRC

(a)General rule
In the case of an individual whose principal residence is damaged or destroyed by fire, storm, or other casualty, or who is denied access to his principal residence by governmental authorities because of the occurrence or threat of occurrence of such a casualty, gross income does not include amounts received by such individual under an insurance contract which are paid to compensate or reimburse such individual for living expenses incurred for himself and members of his household resulting from the loss of use or occupancy of such residence.
(b)Limitation
Subsection (a) shall apply to amounts received by the taxpayer for living expenses incurred during any period only to the extent the amounts received do not exceed the amount by which—
(1)the actual living expenses incurred during such period for himself and members of his household resulting from the loss of use or occupancy of their residence, exceed
(2)the normal living expenses which would have been incurred for himself and members of his household during such period.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 123 was renumbered section 140 of this title.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 91–172, title IX, § 901(c), Dec. 30, 1969, 83 Stat. 709, provided that: “The

Amendments

made by this section [enacting this section] shall apply with respect to amounts received on or after January 1, 1969.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 123

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110