Hal_Al
Level 15

Investors & landlords

Bottom line answer: you do not get to deduct the loss, on the sale, because the principal use, during your ownership, was as you home.  The rental period does not offset that. "Personal losses are not deductible"

 

If you were filing Schedule E, for the rental income, 2014 to 2019, each year's Sch E should show the amount of depreciation you claimed.  When you sell the unit, that  depreciation must be "recaptured".  That is, it is taxed.  But, you can reduce the taxable amount by the $15,000 capital loss (so some of the loss is effectively deductible).

 

If you failed to take depreciation, you are still required to recapture the depreciation your shoulda taken (depreciation allowable).  

 

PS . 5 years of  depreciation on a $120,000 house is about $15,000.  

 

Yearly depreciation = (Cost* - land value) divided by 27.5 years.  So, for example, if the land was worth $40,000: 120,000-40,000 = 80,000.   80,000/27.5 = 2909.   2909 x 5 years = $14545.

 

*If the house was worth less than cost, when you converted it to a rental, you would depreciate the lesser value.