Editing Bad debt (section)

====Business bad debts ====
Business bad debts are debts closely related to your business or trade.<ref>{{Cite web |title=File Taxes Online - E-File Federal and State Returns {{!}} 1040.com |url=https://www.1040.com/tax-guide/taxes-for-the-self-employed/deducting-bad-debt/ |access-date=2024-03-22 |website=www.1040.com |language=en}}</ref> They are created or gained through transactions directly or closely related to your business or trade. A loss from a business bad debt occurs once the debt acquired or gained has become wholly or partly worthless.

Bad business debt examples include:

* Credit sales to customers
* Loans to clients, suppliers, distributors, and employees
* Business loan guarantees

When deducting a business bad debt, the deduction is figured through the taxable income that is based on your business's full or partial gross income.<ref name="irs.gov">{{Cite web|title=Topic No. 453 Bad Debt Deduction {{!}} Internal Revenue Service|url=https://www.irs.gov/taxtopics/tc453|access-date=2021-11-16|website=www.irs.gov|language=en}}</ref>