topic How are vacation rental losses treated post sale? in Investors & landlords

How are vacation rental losses treated post sale?

Cat_Sushi — Wed, 26 Feb 2025 20:03:01 GMT

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?

Re: How are vacation rental losses treated post sale?

PatriciaV — Wed, 26 Feb 2025 20:19:02 GMT

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.

Re: How are vacation rental losses treated post sale?

Cat_Sushi — Wed, 26 Feb 2025 21:21:49 GMT

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

Re: How are vacation rental losses treated post sale?

RobertB4444 — Wed, 26 Feb 2025 21:28:54 GMT

That is correct.

@Cat_Sushi