If the earnest money was going to a house for personal use, the no you cannot deduct the earnest money as a loss. If the house was going to be an investment or rental property then yes you could. If it was for a rental, since you were unable to purchase the house, you can write the loss of the earnest money off on Schedule D under Non-Business Bad Debt Loss. The earnest money can be considered an investment and since you did not get to purchase the house, you did not receive anything from your investment and it could be considered a worthless investment.