Is an unpaid invoice not deductible or line 27a?

An accrual-method business that already included the invoice in gross receipts can deduct the worthless amount, described in Part V as a bad debt and carried to line 27a, in the year it becomes uncollectible.

Is an unpaid invoice not deductible or line 22?

Money you actually spent on the job stays deductible on its own line, so materials on the unpaid job are still line 22 supplies and a subcontractor you paid is still line 11.

Can I deduct an invoice a client never paid? Not Deductible

Q: Can I deduct an invoice a client never paid?

An unpaid invoice is not deductible on Schedule C. If you report income when the money arrives, which is the cash method nearly every freelancer uses, an invoice that was never paid produced no income, so there is nothing to deduct. The loss is already in your return: you simply never recorded the revenue. Claiming a bad debt on top would deduct a number you never added, which is the single most common error made on line 27a. A bad debt deduction belongs only to a taxpayer on the accrual method who already reported the receivable as income and can show the debt became worthless.

Short answer Not deductible

An unpaid invoice is not a deductible business expense.

Why it is not deductible

If you report income when the money arrives, which is the cash method nearly every freelancer uses, an invoice that was never paid produced no income, so there is nothing to deduct. The loss is already in your return: you simply never recorded the revenue. Claiming a bad debt on top would deduct a number you never added, which is the single most common error made on line 27a. A bad debt deduction belongs only to a taxpayer on the accrual method who already reported the receivable as income and can show the debt became worthless.

Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for an unpaid invoice is already written down.

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What an unpaid invoice is confused with

Line 27a, other expenses: An accrual-method business that already included the invoice in gross receipts can deduct the worthless amount, described in Part V as a bad debt and carried to line 27a, in the year it becomes uncollectible.
Line 22, supplies: Money you actually spent on the job stays deductible on its own line, so materials on the unpaid job are still line 22 supplies and a subcontractor you paid is still line 11.

Examples people try to deduct here

$4,200 design invoice a client never paid, cash method: no deduction, and no income was reported either
$900 of materials you bought for that unpaid job: still deductible as supplies
$1,500 you paid a subcontractor on the unpaid job: still deductible as contract labor
An accrual-method agency that booked a $20,000 receivable in 2025 and wrote it off in 2026: deductible in 2026
A $600 deposit you refunded after the job fell through: reduces gross receipts, not a bad debt

What does not belong here

Deducting your unbilled time or your normal rate for work nobody paid for.
Entering the invoice total in Part V as a bad debt while on the cash method.
Treating a customer refund or a price concession as a bad debt, when it reduces gross receipts instead.
Deducting a loan to a friend's business as a business bad debt when it was not connected to your trade.

The limit that applies

Which accounting method you use is the whole answer. Cash-method taxpayers have no bad debt deduction on receivables because the income was never recognised.

What to keep

If you are on the accrual method, keep the invoice, the record showing it was included in income, and evidence of collection attempts, letters, calls, or a collection agency referral, dated to show the year the debt went bad.

Other things that are not deductible

Expense	Line
a business suit	Not deductible
a government fine or penalty	Not deductible
a parking ticket	Not deductible
a personal expense on the business card	Not deductible
a spouse's airfare on your business trip	Not deductible
a traffic ticket	Not deductible
commuting mileage	Not deductible
country club dues	Not deductible
estimated tax payments	Not deductible
federal income tax	Not deductible
groceries for your home	Not deductible
interest on underpaid federal income tax	Not deductible

Related lookups

Sources

This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.

Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.

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