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.
