Business Bad Debt

Business Bad Debt

A bad debt an individual incurs in an activity related to his/her primary line of work. For example, a mechanic might repair a car and allow the owner to pay on credit. If the mechanic does not collect payment, he incurs a business bad debt. In American tax, business bad debt is completely deductible, even if the debt has some remaining value. This contrasts with non-business bad debt, which is only deductible when entirely worthless.