Deducting a Loss From the Sale of a Rental

What are the tax implications of selling a rental at a loss?

Elizabeth Carlassare
4-minute read
Episode #66

Difference Between Rental Sales and Primary Home Sales at a Loss

The situation is very different, however, when it comes to selling the home you live in (that is, your primary home) at a loss. Unfortunately, there is no tax deduction if you sell your primary home at a loss. It’s kind of a subtle point, but the ordinary loss from the sale of a rental is not the same thing as a passive loss from operating and depreciating rental real estate. The $25,000 tax exclusion for rental real estate mentioned by the caller applies to passive losses from rentals. To find out how this nifty tax exclusion works and the income eligibility requirements, check out Episodes 25 and 27 of my podcast.

A really helpful resource when it comes to understanding the tax implications of owning rental real estate is the book Every Landlord’s Tax Deduction Guide  by Stephen Fishman.

And remember, it’s really important to meet with a CPA who’s knowledgeable about rental real estate when you’re considering selling, so you get custom-tailored advice about your options and the tax implications for your situation.[[AdMiddle]

Lastly, I want to give away three copies of Andrew Horowitz’s book The Disciplined Investor. The winners are Mark in New York City, Tracy in Austin, and Dan in Memphis. Congratulations! Andrew kindly donated his book for the give-away. You can check out Andrew’s Disciplined Investor podcast on iTunes.

Cha-ching! That's all for now, courtesy of Money Girl, your guide to a richer life.

As always, everyone’s situation is different, so be sure to consult a tax or financial advisor before making important financial decisions. This podcast is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice.

(1)     According to IRC section 1231, losses from the sale of rental real estate are ordinary losses

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