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taxmap/pubs/p535-055.htm#en_us_publink1000154215

Recovery of a Bad Debt(p39)


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Recovery of a Bad Debt

If you claim a deduction for a bad debt on your income tax return and later recover (collect) all or part of it, you may have to include all or part of the recovery in gross income. The amount you include is limited to the amount you actually deducted. However, you can exclude the amount deducted that did not reduce your tax. Report the recovery as "Other income" on the appropriate business form or schedule.
See Recoveries in Publication 525 for more information.
taxmap/pubs/p535-055.htm#en_us_publink1000154216

Net operating loss (NOL) carryover.(p39)
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If a bad debt deduction increases an NOL carryover that has not expired before the beginning of the tax year in which the recovery takes place, you treat the deduction as having reduced your tax. A bad debt deduction that contributes to a net operating loss helps lower taxes in the year to which you carry the net operating loss. See Publication 536 for more information about net operating losses.