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I made a deposit with a contractor to do work and the contractor is insolvent and I am unable to recover the deposit. Can this be considered non business bad debt?

 
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Vanessa A
Employee Tax Expert

I made a deposit with a contractor to do work and the contractor is insolvent and I am unable to recover the deposit. Can this be considered non business bad debt?

Yes, a deposit given to a contractor that did not perform the work and is now insolvent is considered a nonbusiness bad debt. 

 

How to Report Non-Business Bad Debt on a Tax Return

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