How are vacation rental losses treated post sale?

[Cat_Sushi]

We're looking at doing a 1031 or sale of our vacation home in the next couple years. 

Let's say if we bought the house for $500K, improvements of $100K, depreciation of $50K, would my property basis be $550K?

1) If I sell for $600K, that means a gain of $50K?

2) If I sell for $575, that means I have a passive loss of $25K? 

Is that a correct assumption of how costs would work out given above assumptions?

Also in scenario 2, as I'm not a real estate professional, do I have to continue to carry over the $25K loss until whenever I sell my primary house for instance to be able to use that $25K loss? Basically carry it over indefinitely if I don't ever buy another property? 

[PatriciaV]

Most of our estimates seem accurate, plus or minus commissions and other selling costs. For #2, if you sold for $525K, you would have a $25K loss.

If you have used this property as a rental for over a year, selling for less than your adjusted basis results in a Section1231 loss. This type of loss can offset any other type of income, including self-employment and capital losses.

Further, if you have passive loss carryovers from prior years on this property. these are deductible when you sell the property.

Read more: TurboTax Guide: Selling Rental Real Estate at a Loss

[Cat_Sushi]

Thanks for the link! It looks like per article, I may even offset my normal W-2 income if I sell at a loss?

[RobertB4444]

That is correct.

@Cat_Sushi