Can an uncollectible court ordered judgment and legal fees be deducted?

[jeezerz]

I was awarded a judgement against a contracting company for around $10,000 in 2023. The company abandoned my home repairs after they were paid that amount. I took them to court and won a judgment for the $10,000. The next step was to hire a collection firm to collect the debt. I have paid them nearly $1000 so far. They have sent discoveries and motion to compels and nothing is getting done. The collection firm wants more money to continue to collect. 

I wonder if I can even write this debt off or not on my personal taxes. If I can, what needs to be done to prove to the IRS that I have done all I can do to get the money back?

[DMarkM1]

No.  Personal casualty and theft losses and personal legal fees were limited by the Tax Cuts and Jobs Act of 2017. 

For tax years 2018 through 2025, an individual can deduct a personal casualty or theft loss (one not related to a business or profit-making activity) only if the loss is attributable to a federally declared disaster.

Damage from a hurricane, wildfire, or other disaster declared by the President under the Stafford Act would be deductible for example.

While losses from non-declared events like a personal car accident, house fire, or non-business theft would not be deductible. 

Further only legal fees in discrimination or Whistleblower cases could be deductible.

[edited: 11/21/2025 1:59 PST]

[jeezerz]

In 2021 the city I live in Newnan Ga had an EF4 tornado that caused the damage. Joe Biden approved a major federal disaster declaration for the Newnan area (Coweta County) and seven other Georgia counties following a powerful EF-4 tornado on March 26, 2021. This declaration provided public assistance for government and certain non-profit recovery efforts, but a separate request for individual assistance for residents was denied by FEMA. 

Does this mean I can write off the unrecoverable debt?