The National Directory of Certified Public Accountants

Ask A CPA - Capital Gains & Losses

Is My Non-Business Bad Debt Limited?

Possibly yes. A non-business bad debt is reportable as a short term capital loss transaction and should be entered on IRS Schedule D. You would need to attach a supporting schedule describing the loan, relationship to the debtor, how you tried to collect it and how you determined it was worthless. You can use it to offset capital gains, and up to $3,000 of other income.

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