CAN SOMEONE DEDUCT LOSSES ON INVESTMENT PROPERTY?

By
Real Estate Agent with CB Select Real Estate at Lake Tahoe - 775.691.3855 - DRE: NV28254 CA01139667

Can I Deduct Losses on Investment Property?

This question came up recently in a conversation.  So I started asking CPA's who answered the question and sent me to the IRS website.  What I found follows.

The general rule is that you can’t deduct a loss on the sale of your personal residence. If the house is “an asset that was purchased for investment purposes only, with the intention of incurring a profit and not used for personal purposes, then the loss would be deductible as a capital loss,” says Brittney Saks, who heads the U.S. Personal Financial Services Practice at PricewaterhouseCoopers.

Here is how those capital-loss rules typically work: •You can use your capital losses to offset your capital gains on a dollar-for-dollar basis. •If your losses exceed your gains, or if you don’t have any gains at all, then you can use your net loss to soak up as much as $3,000 a year ($1,500 if you’re married and filing separately from your spouse) of your wages and other ordinary income. Additional losses are carried over into future years. However, Ms. Saks points out that the taxpayer has the burden of proof to show the intention and correct classification of the property.

For more details, see the Internal Revenue Service website, and type “capital gains and losses” in the search box.  That's where I went for the answer on advice from my CPA.

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Coldwell Banker-Nevada & California

 

KenCash@TahoeLiving.com

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Coldwell Banker Select Real Estate of Lake Tahoe

 

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Comments (5)

Erv Fleishman
Realty Associates - Boca Raton, FL
Luxury Prop Specialist Realty Associates

 Hmmm. No mention of holding period in order for it to be a capital gain or loss. Think of it this way, you make it, the government wants it. You lose it, the government wants you swallow it.

Mar 06, 2012 07:41 AM
Ken Cash
CB Select Real Estate at Lake Tahoe - 775.691.3855 - - Incline Village, NV
Lake Tahoe Lake Front Homes, Luxury Homes, Condomi

Good question.. I did not see anything that answered that question.  But you are right  "Think of it this way, you make it, the government wants it. You lose it, the government wants you swallow it"   

Well put Erv...

Mar 06, 2012 08:35 AM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Ken - Thank you for sharing detailed quality information on can someone deduct losses on investment property.

Mar 06, 2012 09:14 AM
Charles Stallions Real Estate Services
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Erv probably has it about right but I did not think of this but it does make sense.

Mar 06, 2012 10:03 AM
Ken Cash
CB Select Real Estate at Lake Tahoe - 775.691.3855 - - Incline Village, NV
Lake Tahoe Lake Front Homes, Luxury Homes, Condomi

John, it was a question actually mentioned to me by one ofmy home owners here in Lake Tahoe.  I had no idea but happen to need to contact my CPS on a unemployment question so I mentioned it to him.

Mar 07, 2012 12:28 AM