We have a couple of properties, the first one is making profit and the second one is making a loss due to the first one having much higher principal (different structure of the mortgages). Both properties combined is making a loss as well (stated in Schedule E, Form 1040) but the combined losses are not deductible from our salaries due to our income being over the threshold so the combined losses are just accumulating year by year. We've owned them both for more than 5 years.
The questions is if we were to sell the first one and when calculating capital gains tax, can we deduct the combined accumulated loss that was reported as part of Schedule E, Form 1040 year by year from the capital gains calculation or can we only deduct the property-specific loss (property-specific mortgage interest, taxes, expenses etc) since we've owned the property?
Thanks in advance.
