I loaned money to a scammer and can’t get my money back. Can I deduct this?

If you made a nonbusiness loan to someone and the loan is completely worthless, you can take a nonbusiness bad debt deduction. A nonbusiness bad debt is treated as a short-term capital loss. A business bad debt is an ordinary loss. A loan to a friend or made for investment purposes is a nonbusiness bad debt, not a business bad debt.

If, however, you can show that your money was obtained by fraud or similar action that constitutes a crime under state law, you can treat it as a theft loss if you itemize deductions. Theft losses involving a personal transaction (not investment or business) are subject to two reductions: $100 per occurrence during the year and 10% of adjusted gross income for all casualty and theft losses in the year.