Will rental property losses offset capital gains losses?

[rmjones40]

Can you use rental property losses to offset realized capital gains from selling stocks and bonds?  For example, the rental property will have a loss of $50,000 compared to capital gains of $100,000.  Would I only have to pay capital gains taxes on $50,000 or would I need to pay on the whole $100,000?

Thanks!

[Carl]

No. While both are basically passive activities, they are not "like-kind".  Therefore rental losses can not offset stock/bond investment losses.

[tagteam · Accepted solution]

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@rmjones40 wrote:

Can you use rental property losses to offset realized capital gains from selling stocks and bonds? 

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There are two kinds of passive activities that give rise to passive losses:

• Trade or business activities in which you don’t materially participate during the year.

• Rental activities, even if you do materially participate in them, unless you’re a real estate professional.

https://www.irs.gov/publications/p925#en_US_2019_publink1000296799

You can only deduct passive losses from passive income (with the exception of the special $25,000 allowance - see link below) and capital gains are not passive income but, rather, are taxed at their own (capital gains) tax rate.

$25,000 allowance: https://www.irs.gov/publications/p925#en_US_2019_publink1000104571