Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
Dragonfly
New Member

Can I deduct my small claim court judgment of $10,000 from a loan that it can't be collected from debtor?

I won the court case but the debtor hasn't paid anything of the $10,000. I have made expenses with lawyer and investigator for collecting my money:  bank levy, wage garnishment, or a real estate lien. Nothing. He is hiding. 

I would like to know if I can deduct that money that I lend him for his business and it has been not paid. Or the expenses for the lawyer and investigator. 

The court sentence is dated January 17, 2018.

1 Best answer

Accepted Solutions
Hal_Al
Level 15

Can I deduct my small claim court judgment of $10,000 from a loan that it can't be collected from debtor?

You have a bad debt. A bad debt is deducted as a short term capital loss. In TurboTax (TT), type> bad debt, non-business <in the find box, then click on "jump to". That will take you to the entry point.

Lawyer fees and other expenses are no longer deductible, under the new tax law. Even under the old law, they were only deductible as a Misc. itemized deduction subject to the 2% of AGI threshold.

One requirement to write off a bad debt, is that it be noncollectable. It appears that  you meet that criteria.  If you later do collect it, you will have to report the money as income.

View solution in original post

1 Reply
Hal_Al
Level 15

Can I deduct my small claim court judgment of $10,000 from a loan that it can't be collected from debtor?

You have a bad debt. A bad debt is deducted as a short term capital loss. In TurboTax (TT), type> bad debt, non-business <in the find box, then click on "jump to". That will take you to the entry point.

Lawyer fees and other expenses are no longer deductible, under the new tax law. Even under the old law, they were only deductible as a Misc. itemized deduction subject to the 2% of AGI threshold.

One requirement to write off a bad debt, is that it be noncollectable. It appears that  you meet that criteria.  If you later do collect it, you will have to report the money as income.

View solution in original post

Dynamic AdsDynamic Ads
Privacy Settings
v