Can home construction losses be deducted.

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Paid $22K for in home construction. Work was only started and never completed. Had to pay another contractor $25K to complete the work. Can I deduct the loss.

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bwaAnswer

Alumni - Champ

Can I deduct the loss.

It depends on the nature of the loss. It would not be a deductible loss if it was merely shoddy workmanship. However, two deductible categories come to mind:

It may be deductible as a theft loss (casualty loss) if the contractor fraudulently took your money and left. You would need documentation such as a police report if that happened.
It may be deductible as a non-business bad debt if the contractor went bankrupt and owed you for payments on incomplete work.

More facts about why the work was never completed and the actions you took could get you a more specific answer.

bwa

Answer

Alumni - Champ

Can I deduct the loss.

It depends on the nature of the loss. It would not be a deductible loss if it was merely shoddy workmanship. However, two deductible categories come to mind:

It may be deductible as a theft loss (casualty loss) if the contractor fraudulently took your money and left. You would need documentation such as a police report if that happened.
It may be deductible as a non-business bad debt if the contractor went bankrupt and owed you for payments on incomplete work.

More facts about why the work was never completed and the actions you took could get you a more specific answer.

Critter

Level 15

The basis of the home will include all costs to improve the property so even if you cannot claim a "loss" you haven't really lost anything, it just cost you more than expected.