I was told to claim capital loss by my agent. I bought my rental for $120,000 and sold it for $105,000. Is my depreciation $15,000?

[MinhT1]

No, depreciation is not necessarily $15,000.

The depreciation you need to recapture is the depreciation allowable in the years the home was rented.

To report the sale of your rental home, please follow the instructions in this TurboTax Help topic.

[toki4004]

Ok, so I calculated 3,000 on my rental, and it's telling me "Personal losses are not deductible". Why? I was told by my agent to file capital loss to get deductions, but here it says I can't...?

[ColeenD3]

We are still not following the math. What is $3,000. How much is your depreciation? Look on your depreciation worksheet. How many years did you rent the property? Did you convert it from personal to rental? These are all considerations.

Business losses are deductible. Where did you enter the sale?

[Carl]

@MinhT1 I believe is making incorrect assumptions about your sitaution. So lets try this to ensure you are provided the correct information for your tax return.

I was told to claim capital loss by my agent.

Assuming you are referring to your real estate agent, I have no expectations of a real estate agent to know all that much about taxes, and would never seek tax advice from one, much less take the advice or guidance of one as gospel.

I bought my rental for $120,000

In what tax year?

Did you actually rent it out at any time after you purchased it?

and sold it for $105,000.

I am assuming you sold it in 2019.

Is my depreciation $15,000?

Nobody here, including MinhT1 has any possible way of knowing how much depreciation you may or may not have taken on the property.

What matters here is if "you" actually rented it out during your period of ownership and if you correctly reported all of your rental income and expenses in the TurboTax program over the time  you owned it - assuming you owned it for more than a year and actually rented it out while you owned it. It also matters if you used the property at any time during your ownership, for personal use. Personal use would be if you lived in the house at any time, for any amount of time as your primary residence, 2nd home, vacation home, or other personal use for your own pleasure and enjoyment.

Ok, so I calculated 3,000 on my rental,

What you do you mean "you" calculated? If you have had this rental for 2 or more years and you have been using turbotax to enter your rental stuff each year, the program figures all this stuff "for you".  Besides, if you really came up with a sold figure of $3,000 for depreciation for any period of time, I seriously doubt you figured anything correctly on that.

Lets see if this will help. I am going to assume that you have "in fact" been reporting this rental property for at least a few years with TurboTax,  you set it up correctly in that first year in Turbotax, and that you have been entering the data correctly each year. If so, here ya go. ( hate assumptions, because they're usually flat out wrong.)

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

[Carl]

Ok, so I calculated 3,000 on my rental,

What you do you mean "you" calculated? If you have had this rental for 2 or more years and you have been using turbotax to enter your rental stuff each year, the program figures all this stuff "for you".  Besides, if you really came up with a sold figure of $3,000 for depreciation for any period of time, I seriously doubt you figured anything correctly on that.

Lets see if this will help. I am going to assume that you have "in fact" been reporting this rental property for at least a few years with TurboTax,  you set it up correctly in that first year in Turbotax, and that you have been entering the data correctly each year. If so, here ya go. ( hate assumptions, because they're usually flat out wrong.)

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

[toki4004]

Thanks for helping me! I Googled some website that had a calculator to give me my depreciation. I would do it myself, but what is the formula? All I see is “calculate your depreciation”, but nowhere on the internet I can find the formula!

• Got the house in 2010 for $120,000
• Moved out in 2014 and turned it into non-homestead/rental
• Sold in 2019 for 105,000

Where I entered it in Turbotax:

Under Federal > Wages & Income > Your income there is a

Sale of Home (gain or loss) - filled that out and it’s telling me: "Personal losses are not deductible"

PS. I've never used Turbotax before.

[toki4004]

I am finding Turbotax hard to use because I can't tell which forms I am filling out - what is the Form number for this type of deduction?

[toki4004]

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". 

I can't find how to go back to this screen. I am probably going to have to start a new account and see if I can't find it... 😑

[Hal_Al]

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.

[AmeliesUncle]

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@toki4004 wrote:

• Got the house in 2010 for $120,000
• Moved out in 2014 and turned it into non-homestead/rental
• Sold in 2019 for 105,000

---

When you turned it into a rental in 2014, what was the Fair Market Value?  What amount have you been using for depreciation?

This can be a tricky situation, so you may consider a tax professional this year.

[toki4004]

How does one find Fair Market Value for a house from years back? I went to Zillow, typed the address, and looked at the history graph for Home Value > This home, and it said ~$93,000 - when I started renting it. 

[toki4004]

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"

"Principal use was your home" - what does this mean? I didn't live in my rental - I lived in my 2nd house (the homestead). This house no.1 was not used by me personally.

PS. Also, my mortgage for the rental was higher than the rent, so we never "gained" monthly income...

[Hal_Al]

I took "Got the house in 2010 for $120,000 .  Moved out in 2014"  to mean that it  was your residence from 2010 to 2014.

If you lived in the home, prior to renting it out, that makes the primary use personal, even though the rental time was longer. 

[toki4004]

I took "Got the house in 2010 for $120,000 .  Moved out in 2014"  to mean that it  was your residence from 2010 to 2014.

Correct.

If you lived in the home, prior to renting it out, that makes the primary use personal, even though the rental time was longer. 

Ok, are you saying that there are no deductions of any type that I could claim because of that?

[Hal_Al]

Q.  Are you saying that there are no deductions of any type that I could claim because of that personal use?

A. Yes, generally.  In particular, you can not claim a capital loss on personal use property. 

But, you can reduce the taxable amount of depreciation recapture,  by the capital loss (so some of the loss is effectively deductible).

Using two examples ( In both examples, you have a $15,000 loss, on the sale): 

Example 1.  You claimed (or should have claimed) $18,000 of depreciation while renting it out.  You have $3,000 of taxable income (18,000 - 15,000 = 3000).

Example 2.  You claimed  $10,000 of depreciation while renting it out.  You have a net $5000 loss (15,000 - 10,000 = 5000).  You may not deduct that $5000 since it was personal use property.  But, you don't have to pay tax on any of the $10,000 depreciation recapture.