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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29779
Experience:  Taxes, Immigration, Labor Relations
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If I sell my mortgaged house and get a price that is less than

Customer Question

If I sell my mortgaged house and get a price that is less than the amount of money I invested in improvements, and I do not buy another house, can I declare a capital loss?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
First of all - we need to verify if you have any gain?The first step is to calculate your adjusted basis - that is the original purchase price PLUS the cost of improvements.If your selling price is LESS than your adjusted basis - you actually have a loss - not the gain - and woudl not have any tax liability.Whether that loss may be deducted against other taxable income - depends on the type of the property.If that is your personal house - the loss may not be deducted.If however - that is a business or investment property - the loss is deductible.
Expert:  Lev replied 2 years ago.
Please also be aware that the amount of mortgage you pay off is not deducted.When you took the mortgage - that amount was not included into your income - correct? That is because it was a loan and you were expected to pay it back. So when you eventually pay it back that amount is not deductible.Only a part of your repayment attributable to the mortgage interest and real estate taxed woudl be deductible.Regarding reporting requirements - if that is your primary home - and you do not have any taxable gain - in most situations - you are not required to report the sale transaction on your tax return.But if you receive a form 1099S - reporting is required.Let me know if you need any clarification or help with calculations.