Loss from property management bankruptcy

[shenlong77]

Hi, I utilize a property management company for my rental home.  The first one suddenly went belly-up and the owner bolted the state (charges were filed and there was an investigation).  In the process, I lost the deposit that the tenant had put in escrow with the company.  Can I deduct that loss?  Where would I do that?

[MargaretL · Accepted solution]

Yes, you can deduct the loss in the year that you will have to pay that deposit back to your tenant. The simplest way to report it is simply to reduce your rent received by that amount.  For example, if you received $12K rent for the whole year, but had to pay back the deposit of $1000, you would enter your rent received as $11,000.