Insurance payout taxable?

[edg543]

I had a vehicle I used for business that was totaled. I owed about $13k and the insurance payed only $7k directly to the loan company (so I owed the remaining 5k still). Is this considered taxable income since I did not receive it directly?

[Vanessa A]

No, this would not be considered taxable income since you did not have a gain on the disposal of the vehicle.  

However, if you ended up with a loss on your vehicle, you may be able to claim it as a business loss.  To determine if you have a loss on the vehicle, you would enter it into TurboTax as a vehicle expense.  You will treat this as a sale of a vehicle.  Walk through and enter your vehicle information, you will be asked about the vehicle cost, prior depreciation and the sale price (which would be the $7,000 you received from the insurance company).  TurboTax will then tell you if you have a loss on the vehicle. 

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