Is loss of a deposit on a house - we had to back out of the purchase for health concerns - considered a deductible loss?

[HelenaC · Accepted solution]

Putting down earnest money, on a personal home, doesn't give you a deduction, if the sale fails and you lose your earnest money. But business properties work differently. If you're buying business property and you forfeit your earnest deposit, you can write that off as a capital loss, provided the property is all business. Trying to buy a rental house that's also going to double as your vacation home doesn't justify claiming the deposit as a write-off. The same rules apply to writing off a capital loss on business real estate as they do for deducting lost earnest money on buying a business.