Originally Posted by taxpayer268
Can I write this off on Schedule D? It took over 9 months to come up with any solution. I still have no vehicle, and only unemployment for the first 5 months of the year, something off the top of the income would sure help.
You can’t.Sometimes, you loan money to friends and relatives. But it may happen that you don't get your money back and incur a loss. For your relief, you can recover your loss by claiming a write off to your tax return because of bad debt. To claim for non-business bad debt write-off in tax return.There must be a true relationship between the creditor and the debtor if you lend money to someone. You must have bona fide documents showing the debtor's obligations towards your money.
Nonbusiness bad debts must be totally worthless to be deductible. You cannot deduct a partially worthless nonbusiness bad debt. A debt becomes worthless when the surrounding facts and circumstances indicate there is no reasonable expectation of payment. To show that a debt is worthless, you must establish that you have taken reasonable steps to collect the debt. It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. You may take the deduction only in the year the debt becomes worthless. You do not have to wait until a debt is due to determine whether it is worthless.