So is this a nonbusiness bad debt that I can deduct then?
TurboTax Help says: "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"
In our case, our contractor abandoned our home renovation project, leaving it incomplete.
He then filed for bankruptcy, so we could not recover the deposits that we paid him for work he didn't complete. We recovered some money from his surety bond, but his bankruptcy prevented us from recovering any more.
