If you had a personal loan that became uncollectible, you may be able to claim nonbusiness bad debt deduction. This would be reported as a short-term capital loss on Schedule D of your tax return.
For your auto shop situation, it sounds like you invested in a business, sold your interest, and never received the money even though you have a court judgment. This could be treated as a capital loss since your investment became worthless.
In both cases, you'll need documentation to support your claim - such as the original loan agreement or investment contract, the small claims judgment, and evidence that the debt is uncollectible.
The timing also matters - you can only claim the deduction in the year that the debt became totally worthless. Since you mentioned you already have a judgment but can't collect, 2024 may be the appropriate year to claim the deduction if that's when it became clear you won't be able to collect. If, however, you knew in a previous year, you'll need to amend prior returns to include the loss.
