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There is a Nonbusiness Bad Debt interview on the Other Deductions and Credits menu of Federal Taxes > Deduction and Credits. The attached screenshot shows where the interview is found (also applicable to TurboTax Premier).

Completing the Nonbusiness Bad Debt interview will generate a Form 8949, necessary to report the loss. There are specific questions that must be answered in order to qualify the loss as a deduction.

• A bad debt is when someone owes you money you cannot collect. You can claim a bad debt ONLY if you have previously reported the value of the debt as income you received.
• However, if you loaned money to someone that you had previously included in your income and the person did not pay you back, then you have a bad debt.
• To be deductible, non-business bad debts must be totally worthless. The deduction can be taken in the year the debt becomes worthless. Non-business bad debts are always a short-term loss.

Here are some other things to consider:

• You must be able to show the debt was legally enforceable and you exhausted all reasonable means of recovering the debt.
•  Loans which are forgiven are not bad debts.
•  Loan guarantees, where you pay another person's debt, are not a bad debt unless your reason for the guarantee was to protect your investment or to make a profit on the associated transaction.
• You cannot take a non-business bad debt deduction for amounts owed to you by a political party or other organization that accepts contributions or spends money to influence elections.
• If you pay off a mechanic's lien or supplier's lien to protect your property from foreclosure and cannot recover the debt from the person for whom the liens were filed (say, a contractor), you have a non-business bad debt.
• You can take a bad debt deduction for the amount you deposit with a contractor if the contractor becomes insolvent and you are unable to recover your deposit.

How to Report Non-Business Bad Debt on a Tax Return.