Taxing - Writing Off Unpaid Debts

[L-1]

I have two rental properties, a single family residence and an apartment building in California.

Last year, my tenant in the SFR broke his lease about three months in (without my consent) and moved to the opposite coast. The lease expired around June of 2020. Because it was winter (no one wants to move during the winter holidays) and later the pandemic, I was unable to find a new tenant. I am out about $35,000 in unpaid rent and suing the guy is pointless because my sources tell me he is broke.

Similarly, I have a tenant in the apartment building who is unemployed because of the pandemic and (as of now) is $5,000 behind in their rent. Suing is pointless because they are broke and eviction is prohibited by my state's current Pandemic laws.

When I do my 2020 returns, can I 1099 these folks for the money they owe and write this off as unpaid debts?

Thanks,

L-1

[flyingron]

If you forgive the debt of more than $600 you have to send the 1099C.

Unless you're in some other type of accounting other than cash method, you don't get a write off for uncollectible rents (whether you 1099 or not).
it's just income you never received (and were potentially subject to taxes on). You just have less income to deduct the expenses (mortgage interest, taxes, insurance, maintenance) from.
If the resulting thing is a loss, then you have to determine if this is an active or passive activity. Rental by default is passive. This means you can't take the loss against other non-passive income that you have.
If you are inactive management of the property, you might be able to.

You were getting the benefit (supposedly) of the failure to be paid rent in the tax year it was due.

[llworking]

If you forgive the debt of more than $600 you have to send the 1099C.

Unless you're in some other type of accounting other than cash method, you don't get a write off for uncollectible rents (whether you 1099 or not).
it's just income you never received (and were potentially subject to taxes on). You just have less income to deduct the expenses (mortgage interest, taxes, insurance, maintenance) from.
If the resulting thing is a loss, then you have to determine if this is an active or passive activity. Rental by default is passive. This means you can't take the loss against other non-passive income that you have.
If you are inactive management of the property, you might be able to.

You were getting the benefit (supposedly) of the failure to be paid rent in the tax year it was due.

If someone's income is below 100k, they are allowed to take a loss from rentals against active income, up to 25k. Income over 100k causes a phase out that is quite short. Now, I agree that its probably unlikely that this guy's income is under 100k considering the rents he charges, but it could be, so its incomplete to simply state that he can't take losses against active income.

[flyingron]

Yes, I got a little too simplified in my explanation.

[L-1]

Yep, cash acural. Income is over $100k.

It was worth a try. Thanks all!

[flyingron]

But if you have other rental properties, you can reduce the income from these by the losses incurred on the others.
If you are an active participant, you can take the rental loss against other (non-passive) income.
There's just no way to double dip on the lost rent.