Rental (Loss) deduction at time of sale - Is it tax deductable?

Question

Lets say I bought the property for $100k, rent it out for 2 year and then sell it for the same price at the end of the year for $100k. That year, I took $7k of depreciation, total rental loss of $10k carried forward (real rental loss before depreciation of $3k). Thus, my real gain/loss at time of sale is ($100k - $7k of depreciation - $10k total rental losses carried forward) = -$3k losses. Is this loss of -$3k upon of sales deductible somewhere on my tax return?

Answer 1

What depreciation did you take the first year you rented the house? Let's say you took $3,000 depreciation the first year and $7,000 the second year (although in fact those numbers are not right).

Anyway, if there were no other changes to the basis of the property, your adjusted basis in the house is $100,000 minus all depreciation taken up to the sale. So in this example, your adjusted basis is $90,000.

If you then sell the house for $100,000 (assuming this is the amount realized without any other additions or subtractions), then you have a capital gain on the house of $10,000 and report this gain on Schedule D via Form 4797.

The operating loss on the house of $3,000 does not figure into the capital gain or loss on the house. The operating losses offset other gains or are carried forward.

Finally, let's suppose you sell the house for $80,000 instead of $100,000. You now have a capital loss on the sale, and that capital loss can offset gains or be carried forward.

Answer 2

Agree that the loss on a private place of abode is non-deductible. Disagree on the quantity of capital loss recognizable on the sale of a non-own place of abode. i think of the capital loss found out on a house held for lease or for investment could be deductible in finished (no allocation between pre- and submit-conversion of a private place of abode to condominium/investment assets). For a private place of abode switched over to condominium/investment there's a call for for a particular quantity of time to bypass after the conversion (like a million 3 hundred and sixty 5 days) yet i don't think of so. Letting it sluggish elapse after the conversion and earlier the sale might, in spite of if, advance your case.

Answer 3

You'd really want to hire a tax professional for this. I assume you've accounted for all your closing costs from buying and selling as well?

Some of this can depend on whether you are an active or passive investor, whether you can carry losses over to offset your regular income. That's where it gets sticky, and why I feel you might not get accurate info on here.

Answer 4

Yes on Form 4797 which then flows to Schedule D.