@PGB12 wrote:
Thanks TagTeam.
I read the article you linked again, plus Publication 550 & still can't find if there is a time limit to deducting this debt.
A non-business bad debt is deductible in the year the debt becomes uncollectible. This may vary depending on the type of debt. For example, if you pay a deposit to a contractor to remodel your kitchen, and the contractor goes out of business, you must first take all legal steps to collect the debt before you can deduct it. That might mean suing the contractor, or listing yourself as a creditor in their bankruptcy proceeding, which means the debt is not fully uncollectible until the legal case is settled and you either recover something or nothing. So the actual date of the tax deduction could be some time down the road from the loss.
However, I agree that a debt to yourself to open your own business is not eligible to be treated as a non-business bad debt.
