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I loaned money to a relative in my native country with funds I had in that country. My relative never paid me back. Am I allowed to deduct it as bad loan loss in my american tax return?

user61976
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    Have you tried to collect the loan? That is required to deduct the loan regardless of the other circumstances. – D Stanley Aug 25 '17 at 13:16
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    You'll also need to have something in writing indicating that it's a loan, otherwise it will likely be classified as a gift (and non-deductible) – D Stanley Aug 25 '17 at 13:19
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    If you are a US tax resident or a nonresident who elects to be treated as a US tax resident, then I hope that you have been declaring the income received (e.g. interest) in that foreign account on your US income tax return and declaring the existence of all non-US bank accounts for FBAR purposes, – Dilip Sarwate Aug 25 '17 at 14:45

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According to the IRS:

To deduct a bad debt, you must show that:

  • there was an intention at the time of the transaction to make a loan and not a gift; AND
  • you have no reasonable expectation that the nonbusiness bad debt will be repaid.

So if you fulfill the basic requirements, then generally yes, you can deduct them from your taxes.

However, as always, please refer to a professional CPA for any final tax determinations.

Michael
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