If I sell my house for $30,000 less than what it was purchased for. Can I get a tax break for the loss?

Question

The house is not a primary residence but an investment propery.

Answer 1

If it was an investment property, I believe you can deduct the loss up to the amount of income you have.

That is, if you received 20,000 in rent, you can deduct 20,000 of the loss (assuming no other expenses).

If you were depreciating the property, your book value may be less than the sell price, so there may be a gain to be recognized anyway.

An accountant could give you the exact numbers, once you provide him with more information than you gave us.

Answer 2

First of all you need to see if you rented the property and made depreciation an expense part of your day to day business. You also need to make sure if the house was bought as an investment simply as a second home or as an investment for something else. If you bought the house as a second home it is still considered a personal house but it is not under the same tax protections as a primary residence. The tax rules simply say that if you sell a house every 2 years you can get a tax break if it is your primary residence and the numbers are somewhere in the $200,000 range. Only if this is a true investment property and no depreciation was taken or depreciation was taken less than the $30,000 loss can you deduct anything. You will not be able to deduct if an investment more than about $3200 a year(exact number may be adjusted up a little bit this year) and would need to carryover the ammount year by year. If this was in the end not a true investment it is considered a personal expense or as a former tax guy I knew said, used toilet paper expense and not deductible:). If youd like more information simply go to sections 162 and 262 of the tax code business and personal deductions or have your tax pro do that for you.
Hope it helps.

Answer 3

Wayne Z's answer is the only one that is correct.

I've seen situations where the taxpayer had a taxable gain from the sale for exactly the reason he showed AND an ordinary income gain on top of that due to Cancellation of Debt income when the property was heavily mortgaged for more than the sale price. That's the worst possible scenario and too frequently the case in today's market.

One thing to watch out for is the fact that depreciation must be recaptured even if you did not take a depreciation deduction! The catch phrase is "depreciation allowed OR ALLOWABLE" (emphasis mine). Even if you don't take a depreciation deduction you MUST recapture what you could have taken.

As Wayne said, seek professional help. You need it!

Answer 4

You can deduct the loss on an investment. It can be netted against other investment gains, or can be carried forward.

The nature of your loss depends on the use of the property. In particular, was the property depreciable real estate or was it land. If it was depreciated, your loss is limited because of the depreciation that has been taken.

Answer 5

As an investment property, yes you can deduct the loss. The problem is that you will be subject to the capital loss carryforward. You can only recognize a $3,000 capital loss per year, the rest gets carried forward.

Answer 6

This is a rather complex transaction.

Due to the depreciation recapture (if any) you may have a loss on the sale but it is also possible to have a gain.

For example:

$190,000 Original Cost of House
10,000 Plus: Improvements
(50,000) Less: Depreciation Allowed or Allowable
$150,000 Basis in House

$160,000 Sale Price of House.

In the above example, the seller would recognize a $10,000 gain on the sale even though they sold it for $30,000 less than they paid for it.

My advice: Seek professional help.

Answer 7

I highly doubt it. Unfortunately with the decline in the house market a lot people are losing money on houses they initially bought as investments.

Answer 8

Wouldn't that come under Capital Loss?

Answer 9

No tax break for a personal choice thats how the IRS sees it!

Answer 10

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