Turning Your Home Into a Rental for a Tax Loss

Since so many sellers are taking a financial hit to sell in our soft real estate market, it really adds insult to injury if a seller can't write off that home loss come tax time.

Yet, our current IRS tax code is pretty explicit regarding how it handles the sale of a personal residence. As long as you've lived in the home for two out of the past five years, you will not pay taxes on $250,000 of capital gains ($500,000, if married) upon sale. That pertains to profit, though, not a loss.

If you've suffered a loss on the sale of your home, you're not ordinarily entitled to deduct any of that loss from your taxes.

However, it made me wonder if there was a tax loophole. Suppose, for example, that you've converted that home into a rental? Would that provide a way to deduct a loss upon sale? To get an answer to that scenario, I turned to Julian Block, a tax lawyer from Larchmont, New York . . . read more about home sale losses.

More Articles by Elizabeth Weintraub, click below:

• Tips for Selling in Winter
  
• Home Selling Online
  
• Expired Listings

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