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It depends. An inherited house is considered investment property and you can deduct the loss on the inherited property, but only if there was no personal use after your mother-in-law passed away - it was simply held between inheritance and sale). The sale also needs to have been made to an unrelated party in an arm's length transaction.
The $3,000 you are referring to is the amount net capital losses may be used to offset ordinary income. In your example, yes, your gain is $4,000 and the $3,000 limit doesn't apply. If we use your figures, but imagine there was $0 capital gain, you could use $3,000 of the $6,000 loss to offset this year's ordinary income, and the remaining $3,000 would be a capital loss carryover. The carryover can be carried forward to future years to offset any capital gains and ordinary income.
Here's how to report this in TurboTax Online:
- Navigate to Wages & Income > Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto) > Add/Edit
- Add Investment
- Choose "Enter a different way"
- Choose Investment type of Other
- Add a description
- You will be asked what type of investment, choose "other". Also, indicate this was inherited.
- Proceed to enter the rest of the information.
- Column (f) can be left blank
