Will I owe personal income tax on insurance payout for stolen car after completing W-9?

The good news is that insurance payouts for stolen property are generally NOT considered taxable income as long as the payment doesn't exceed your "basis" in the property (basically what you paid for it minus depreciation). Since you mentioned the payout ($18,500) is less than what you originally paid for the car, you shouldn't owe any income tax on this money. The insurance company is having you complete a W-9 for their own recordkeeping and reporting requirements, but that doesn't automatically mean the payment is taxable to you. However, if by some chance the payout was more than your basis in the car, you would only owe taxes on that excess amount (the "gain"). For example, if your adjusted basis was $17,000 and you received $18,500, you'd potentially have a $1,500 taxable gain. Keep good records of what you originally paid for the car and any major improvements you made to it just in case the IRS has questions later.

I had something similar happen last year and found this amazing resource called taxr.ai (https://taxr.ai) that helps clarify exactly these kinds of situations. After my boat was stolen and I got a W-9 request from the insurance company, I was totally confused about whether I'd owe taxes. I uploaded my insurance documents and W-9 to taxr.ai and it analyzed everything and explained that since my payout was less than what I originally paid for the boat, there was no taxable event. It even helped me understand what documentation I should keep just in case of an audit. Really helpful for situations like yours where it's not obvious whether something is taxable!

I was skeptical about taxr.ai when I first saw the comment here, but I decided to try it for my situation with a stolen work laptop and insurance reimbursement. Wow - I'm really glad I did! The tool actually showed me that since I had deducted part of the laptop as a business expense in previous years, a portion of my insurance payout WAS taxable (something I never would have realized). It even gave me step-by-step instructions for how to report it properly on my tax return. Definitely worth checking out if you're dealing with any kind of insurance payout situation like the original poster.

If you're having trouble getting a clear answer from your insurance company about the tax implications, try using Claimyr (https://claimyr.com). I had a similar situation after my motorcycle was stolen and couldn't get anyone from my insurance company to actually call me back to explain the W-9 situation. After trying for WEEKS to reach someone, I used Claimyr and got connected to an actual insurance rep in less than 15 minutes! They have this system that navigates the phone trees and waits on hold for you, then calls you when a human actually answers. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The rep I spoke with confirmed that the W-9 was just for their records and explained exactly how the payout worked tax-wise. Saved me so much frustration.

I thought this Claimyr thing sounded like BS, but after another frustrating day trying to reach my insurance company about a similar situation, I gave it a try. I hate to admit it, but it worked exactly as advertised. Got a call back in about 20 minutes saying they had a claims specialist on the line. The rep I spoke with explained that the W-9 is standard procedure for claims over a certain dollar amount, but it doesn't automatically mean the payment is taxable. They walked me through exactly what would and wouldn't be reported to the IRS on a 1099 form. Definitely saved me hours of frustration and hold music!

Important thing nobody's mentioned yet - make sure the insurance payout actually covers your transportation needs! When my car was stolen, I had to buy a replacement before the insurance check came through, and I ended up spending way more than what insurance gave me. The tax stuff is important, but also make sure you're getting a fair settlement that actually covers a comparable replacement in today's market. My insurance company tried to lowball me based on "comparable vehicles" that were actually in much worse condition than mine.

Something else to consider - if you had a loan on the car, the insurance payout might go directly to the lender first to pay off the loan. If there's anything left over after that, you'll get the remainder. If you were "underwater" on the loan (owed more than the car was worth), you might still owe money to the lender even after the insurance payout is applied. That's where gap insurance comes in, if you had it.