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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.
April 2, 2022
5:59 AM