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TaxMomNJ
TaxMomNJ, Senior Tax Advisor
Category: Tax
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Experience:  7 years experience with tax preparation company, over 500 hours of tax courses taken
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I own a house. I now have to sell this at a price far lower

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I own a house. I now have to sell this at a price far lower than what I paid for this. How do I account for this loss on my taxes?
Submitted: 6 years ago.
Category: Tax
Expert:  TaxMomNJ replied 6 years ago.

JACUSTOMER,

 

The house that you own - is it a primary residence or a rental?

Customer: replied 6 years ago.
it is not a primary residence
Expert:  TaxMomNJ replied 6 years ago.

JACUSTOMER,

 

What is the house used for?

Customer: replied 6 years ago.
Is there a difference in treatment?

The house was a summer house for our family

But We also rented it out as well and accounted for this in our returns
Expert:  TaxMomNJ replied 6 years ago.

There is a difference in tax treatment.

 

How many days a year did you rent it? How many days did you stay in it?

 

How did you account for it on your tax returns?

Customer: replied 6 years ago.
We rented it for a few months every year

And we didn't use it as often as we thought , less than 10 days
Expert:  TaxMomNJ replied 6 years ago.

JACUSTOMER,

 

I need to know a little bit for information than what you've given me. Whether your house is considered a rental property or a vacation home depends on number of days you used it. How have you accounted for the home on your tax returns?

Customer: replied 6 years ago.
as a rental property
Expert:  TaxMomNJ replied 6 years ago.
Did you ever use this house as your main home?
Customer: replied 6 years ago.
no we did not
Expert:  TaxMomNJ replied 6 years ago.

JACUSTOMER,

 

If you have been treating this property as a rental, you will have to complete Form 4797, Sales of Business Property.

 

There is not much simplicity when you're selling a rental property. You will have to take many things into consideration-- list your purchase price of the home, things you have done to increase the basis of the home, list your sell price of the home, and, importantly, if you have been taking depreciation on the home, that will be added to your added to your basis in the home. Depending on how big of a loss you're looking at, how much depreciation was taken, and additions and subtractions to the basis, you may not actually be looking at a loss.

 

My advice is to go through Pub. 523, Selling Your Home. http://www.irs.gov/app/vita/globalmedia/p523.pdf

 

Look at the things that are added to the basis. Also, look at the selling expenses you may use. This will help you sort out whether or not you will have a loss or a gain. Either way, you will use Form 4797 to report the transaction.

 

Please let me know if I can assist you further. Also, please consider seeking a tax professional or accountant in your area to assist you with filing your taxes when you complete this sale, as the smaller details can make big differences and mistakes can cost you.

Customer: replied 6 years ago.
how are losses and gains treated for this ?
Expert:  TaxMomNJ replied 6 years ago.

JACUSTOMER,

 

Losses or gains are treated as capital losses or capital gains. Capital gains will be taxed at capital gains rates.

Customer: replied 6 years ago.
and how are losses handled?
Expert:  TaxMomNJ replied 6 years ago.

JACUSTOMER,

 

They are subtracted from your income to reduce your tax liability.

TaxMomNJ and other Tax Specialists are ready to help you