Loaning Out Money Is A Tax Deduction

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) February 10, 2010 -- It doesn’t matter who receives a personal loan, as long as the person doing the lending expects to be paid back, and is not, this debt becomes a tax deduction. Some of the main criteria are that the person doing the lending must have done it from income on which taxes were paid and must not have received any return payment whatsoever. If even a partial return payment of the loan was made, the debt no longer qualifies for a tax deduction.

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Loaning Out Money Is A Tax Deduction

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The tax deduction for the personal loan can be claimed on prevailing circumstances, such as the person receiving the loan going bankrupt. It is not necessary to file a lawsuit against the individual owing the money, although it is advisable to attempt some sort of collection. The loan must be valid and legally enforceable. A signed agreement or even a witnessed handshake might qualify under these terms.

The tax deduction for the personal loan is filed as a short-term capital loss and is inserted in schedule D on an income tax return. A statement outlining the nature and particulars of the debt should accompany these items. The name of the person owing the debt, the due date of the debt, any efforts made to collect the debt, and why the debt is worthless should be included in this statement.

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