Real Estate Losses
 

I am in the process of trying to sell my primary residence and it looks like I will have to sell it at a loss. I am being told that this isn't tax deductible. Has anyone heard if the govt is working on changing this rule?

I need to move into a bigger place but, I can't say that I will be there for more than 5 years. I don't really care about making money on the place but, I also don't want to deal with taking another loss in the future. If they change the rule it may be an easier pill to swallow.

Any insight would be greatly appreciated.

Re: Real Estate Losses
 

[ QUOTE ]
I am in the process of trying to sell my primary residence and it looks like I will have to sell it at a loss. I am being told that this isn't tax deductible. Has anyone heard if the govt is working on changing this rule?

I need to move into a bigger place but, I can't say that I will be there for more than 5 years. I don't really care about making money on the place but, I also don't want to deal with taking another loss in the future. If they change the rule it may be an easier pill to swallow.

Any insight would be greatly appreciated.

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I don't know for sure, but you might be able to write off the loss if you're classified as a dealer. In your case, that wouldn't apply since you lived in the house as a primary residence.

Have you considered renting the house out? Even if you rent at a small negative cash flow you MIGHT be able to weather the storm for a year or three. Might not be worth the trouble though.

Re: Real Estate Losses
 

I have no desire to deal with rental properties but, if I did I could have positive cash flow with the property. My worry is that the prices in my area are going to be flat or even down for a while. Even if I felt I could make money long term it's not worth the hassle for me. I just want to move on.

Re: Real Estate Losses
 

[ QUOTE ]
I have no desire to deal with rental properties but, if I did I could have positive cash flow with the property. My worry is that the prices in my area are going to be flat or even down for a while. Even if I felt I could make money long term it's not worth the hassle for me. I just want to move on.

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You could ask your CPA, but my guess is that you're out of luck.

Re: Real Estate Losses
 

there is no deduction for a loss on sale of primary residence.

Re: Real Estate Losses
 

Not sure if this is completely applicable but look into a 1031 exchange

Re: Real Estate Losses
 

You can't 1031 exchange here this doesn't work for lots of ways . As a general note you can't 1031 a primary residence, has to be real estate as an investment. You also can't 1031 to roll forward losses, a 1031 just defers gains if you had them if you replace your investment with a like kind replacement.

Steve

Re: Real Estate Losses
 

you can turn it into a rental for a period of time and then take a loss as its an investment property. but probabley best is to move on with the loss and not compound it.

Re: Real Estate Losses
 

Thanks for the info. I am wondering if the tax code will change to write off losses for the sale of a primary residence. In my situation I have lived there for 4.5 years and have had it on the market for eight months with no luck. Due to a growing family I have to move into a bigger place.

I can't say that I will be in the next place for more than five years. I live in a big city and may decide to move to an area with better schools when my kids get to be that age. I would love to buy a place but, I can see a the places in my price range may be worth less in 5 years. I know some people will say rent and that may be the best option for me at this point.

Is there a fundamental reason why the government wouldn't allow losses for a primary residence after you have lived there for a specific amount of time?

Re: Real Estate Losses
 

[ QUOTE ]
Is there a fundamental reason why the government wouldn't allow losses for a primary residence after you have lived there for a specific amount of time?

[/ QUOTE ] It's connected to the fact that gain from your primary residence is exempt from taxes after you've lived there for the specific amount of time, I gather.