Do we say "confiscate" in everyday conversation?
A robber stole a car and "The police confiscated his car"
A student brought a knife to school and "The security man confiscated his knife"
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Confiscate is quite formal, but the correct word for a formal situation in which the police are taking something. That is a formal process and the specific word is better than the more general "take".
Confiscate is not very formal and it would be normal for a parent or teacher to confiscate a teenager's property as behaviour management.
You're grounded for a month, and I'm confiscating your phone for 24 hours.
Oh no, please don't take my phone!
The verb impound is used when 'confiscating' a car. Lexico has
1 Seize and take legal custody of (something, especially a vehicle, goods, or documents) because of an infringement of a law.
vehicles parked where they cause an obstruction will be impounded
The word 'confiscate' would not apply to a stolen car, because it does not belong to the thief. The seized vehicle is usually taken to a pound³.
1.1 A place where illegally parked motor vehicles removed by the police are kept until their owners pay a fine in order to reclaim them.
The word confiscate would be appropriate for the knife example, and I don't think it is particularly formal. Lexico has
1 Take or seize (someone's property) with authority.
the guards confiscated his camera