Okay, my roofing contractor ripped me off and now I have to pay an
additional $1200 to fix what he didn't do (not counting the costs and labor
I'll have to cover the water stains on the ceilings from him not tarping the
roof correctly when he was fixing it.)
I know that you can claim an uncollectible debt (up to $3,000 a year) on
your federal taxes. Would the fact that I have done everything in my power
to collect the additional money I need from him (including sending him a
certified letter, notifying the BBB, etc) put this in that category?
Any CPA's out there?
Deduct that $1200 on your tax return, and it reduces your _taxable_income_,
*not* your tax, by $1200. If you are in the 28% tax bracket, for example, the
reduction in your tax owed will be 28% of $1200, or $336. You're still out
Sue the contractor for damages and you may recover the whole $1200. Depending
on the small-claims threshold in your state, you might not even need a lawyer.
If you do hire a lawyer, you can sue for your legal fees in addition to actual
Not dreaming, it's there. But there's a threshold, IIRC somewhere around 7% of
adjusted gross income, and you can deduct only the portion of such losses that
exceeds the threshold. It takes a *really* big loss to become deductible.
Catastrophic losses are deductible, most losses short of catastrophe
aren't. Short version: you're screwed either way.
Maybe, maybe not, I'm not a tax accountant so I don't know. My point was that
recovery of the amount, through civil processes, will yield much more money
than deducting it on the tax return ever could. Too many people look at tax
deductibility as though it were some sort of magic source of free money. While
it's better to incur deductible expenses than non-deductible ones, it's always
even better still to avoid incurring the expenses at all.
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