10/07/2026
🫴💸 SOMEBODY OWES YOU MONEY AND NEVER PAID YOU BACK?
😬🏦THE IRS MAY CARE.
That loan you made to a friend, family member, or somebody who suddenly developed amnesia when repayment day arrived could potentially have a tax consequence.
Under federal tax rules, a bona fide personal loan that becomes completely worthless may qualify as a nonbusiness bad debt.
But before everybody starts deducting the $800 their cousin owes them... NO! 😂‼️
🇺🇸You generally need to be able to show that:
• It was a real loan, not a gift.
• There was an actual expectation of repayment.
• The debt became completely worthless.
• You had a legitimate basis in the debt.
Qualifying nonbusiness bad debts are generally reported as short term capital losses, which means the deduction works differently from simply subtracting the entire amount from your income.
🇺🇸PTS TAX EDUCATION: Sometimes money you LOST can matter just as much as money you MADE.
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