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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3170
Experience:  IRS licensed Enrolled Agent and tax instructor
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I purchased a home in Connecticut in 2009 for $199,000. In

Customer Question

I purchased a home in Connecticut in 2009 for $199,000. In 2012 I moved out of state and began renting the home. I am looking to put the home on the market to sell but based on real estate agent feedback will probably be able to sell the house for around $160,000-165,000. Is this loss tax deductible when I file 2016 taxes?
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

Because this is considered now a business property you will be able to deduct the loss but keep in mind that you will have to account for the depreciation you have been taken, which according to my calculation will be around 20K. You would have to check your return for the exact amount. Let's assume you will sell it for 160K and it will cost you additional 8K to sell it (closing cost and RE commission), you will end up with about 27K loss assuming that the fair market value of the house in 2012 was still 199K.

If the fair market value was less than that, lets say 189K, your loss would be 17K. There are too many variables to give an exact number, but basically, if you are selling a rental property with a loss your starting point will be your

purchase price + pre-renting improvements OR fair market value on the day of conversion (whichever is smaller) + expenses of sale - depreciation = adjusted basis.

Adjusted basis - sales price (not the net proceeds) = capital loss.

Expert:  emc011075 replied 1 year ago.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.