A business (in the field of lending money) bad debt is an ordinary loss.
From my understanding, and please correct me if I'm wrong, ordinary losses are usually above the line (for AGI) deductions in a tax formula. Are business bad debts deductible above the line or are they itemized.
Bad debts are above-the-line items and deductible whether or not they are business related. You must prove that the obligation has become completely worthless, with no reasonable expectation of repayment (a factual issue) and you must prove the timing of the worthlessness, ie., that the worthlessness occurred during the year in which you took the deduction.
This type of debt should be deducted against gross income, that is, "above the line," so to speak.
Your understanding of how this works seems to assume that you're filing a 1040 as an individual.
Depending on how you are doing your business, exactly where the deduction is placed will vary. Even for most individuals in business for themselves, the proper location for the deduction is on a schedule C. This is nothing to do with "over the line" except in concept. Partnerships and corporations may have forms where the location is different.
The classification of a business bad debt is a technical issue, which is frequently subject to IRS audit. You may want to retain an attorney to determine if the debt you are concerned with is a business bad debt for income tax purposes.
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