Contractor took $7,000 down payment the went out of business can I claim this as theft loss

[Marketstar · Accepted solution]

You may be able to claim the loss on your loan as a non-business bad debt.

However, to do so, the IRS requires that you take every reasonable measure to recover the debt.

See Nonbusiness Bad Debt for definition and requirements for deduction.

A nonbusiness bad debt is reported as a short-term capital loss, subject to the $3,000 limit per year, the remaining amount is carried forward to future years until the loss is consumed.

To enter a nonbusiness bad debt:

·       Type in nonbusiness bad debt in the search box, top right of your screen

·       Hit the Enter key

·       Click jump to nonbusiness bad debt in the search results

·       Follow the prompts and online instructions