Tax liability on total loss insurance payout

[Casey Gilbert]

We lost our STR this spring due to a wildfire. Our insurance (replacement policy) has paid out the cost to rebuild which our mortgage company is holding. Every cent of this insurance payout will be going to rebuild this house. We also got loss of rents, which I understand to be taxable income. We are trying to figure out if the home replacement insurance payout is also taxable. Unfortunately we had only owned the home 3 months prior and had not taken bonus depreciation on it yet.