I have a personal loan that is way overdue and will never be paid back. Can I declare this loan as a bad debt and write it off?

[Art27]

Is there a way to declare a personal loan that was never paid?

[Mike9241 · Accepted solution]

it is reported as a short-term capital loss. the IRS requires that there is proof it had value at the beginning of the year but none at the end 

reg 1.166-1(b)(1)  and PUB 550

require a statement be attached to the return with the following info

• A description of the debt, including the amount, and the date it became due;
• The name of the debtor, and any business or family relationship between you and the debtor;
• The efforts you made to collect the debt; and
• Why you decided the debt was worthless.
For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. if you have not taken action to try to collect (court action is not necessary) the IRS may deny the loss. having documentation showing you tried to collect is advisable.

this is handled in Turbotax under deductions and credits

[Art27]

Gave me a good start to know what I had to do.  Thanks