If someone owes you money that you can't collect, you may have a bad debt. Generally, to deduct a bad debt, you must have previously included the amount in your income. You generally can't take a bad debt deduction for unpaid salaries, wages, rents, fees, and similar items, since they were never included in income
If you lend money to a relative or friend with the understanding that it is not a gift and they must repay it, and they don't, you may deduct it as a bad debt.
Bad debt must be totally worthless to be deductible. To show that a debt is worthless, you must establish that you've taken reasonable steps to collect the debt. It's not necessary to go to court if you can show that a judgment from the court would be uncollectible. You don't have to wait until a debt is due to determine that it's worthless.
Report a nonbusiness bad debt as a short-term capital loss on Form 8949. A nonbusiness bad debt deduction requires a separate detailed statement attached to your return. The statement must contain: a description of the debt, including the amount and the date it became due; the name of the debtor, and any business or family relationship between you and the debtor; the efforts you made to collect the debt; and why you decided the debt was worthless.