ColeenD3
Expert Alumni

Deductions & credits

Yes. It is deductible. Enter it in the investment section.

 

How to report the loss

The actual task of reporting a bad debt is relatively simple. The steps are:

  • Complete Form 8949 Sales and Other Dispositions of Capital Assets
  • Enter the amount of the debt on line 1 in part 1, and write the name of the debtor in column (a)
  • Enter your basis in column (e)—the amount of money that has not been paid back
  • In column (d), write 0—the amount the borrower did not repay

The IRS also requires that you attach a bad-debt statement to your tax return, explaining the details of the loan you made. You must deduct a bad debt in the year it becomes worthless. If you realize you could have reported and taken a deduction for an unpaid debt years ago but didn't, you generally have only three years to amend your return in order to claim it on your tax return.

 

Bad Debt