Total loss: taxable income?

[edg543]

I had a vehicle which I used for business that was totaled. I owed 13k on it at the time. The insurance company paid only 8k and this was paid directly to the loan company. So I still owed 5k. In past years, I had claimed the standard mileage deduction which depreciated the vehicle *below* the actual sale price. Does this now count as taxable income even though I did not receive the payment directly (the loan company did)?

[RobertB4444]

Yes.  You received a deduction for the depreciation and then received a payment for the car.  The fact that you spent that payment to pay down your car note (through no choice of your own) doesn't enter into it.

SO you sold the car for $8,000 and you will owe tax on the portion of that that is equal to the business use percentage of the car.

@edg543 

[edg543]

Thank you for your response. Does the deductible that was taken out by the insurance company ($1,000) also count as taxable income?