See IRS Tax Topic No. 453 Bad Debt Deduction - https://www.irs.gov/taxtopics/tc453
Nonbusiness Bad Debts - All other bad debts are nonbusiness. Nonbusiness bad debts must be totally worthless to be deductible. You can't deduct a partially worthless nonbusiness bad debt.
A debt becomes worthless when the surrounding facts and circumstances indicate there's no reasonable expectation that the debt will be repaid. To show that a debt is worthless, you must establish that you've taken reasonable steps to collect the debt. It's not necessary to go to court if you can show that a judgment from the court would be uncollectible. You may take the deduction only in the year the debt becomes worthless. You don't have to wait until a debt is due to determine that it's worthless.
Report a nonbusiness bad debt as a short-term capital loss on Form 8949, Sales and Other Dispositions of Capital Assets (PDF), Part 1, line 1.
