Is a Loss on My Personal Residence Deductible?

What are the tax consequences when you sell your home, a personal use property, for a loss or make a bundle on grandma’s antique silver goblets, a listed personal use property? Here are the rules.

Personal Use Properties. The gains and losses on the sale of a personal use property, which includes all items used for personal use, such as homes, cars, boats and furniture, must be reported as they are subject to the “$1,000 Rule.” That is, the Proceeds of Disposition and Adjusted Cost Base of personal use property are deemed to be no less than $1,000 for the purposes of computing any gain or loss. This eliminates reporting small transactions. Losses on personal use properties are not deductible, however.

Example: Peter put a lot of money into his cabin at the lake. He bought it for $50,000 and then put in a deck and an addition for another $50,000. He did not use it as a rental property and after a year, he had to sell it for only $80,000 as he took a job in another city. His $20,000 loss, unfortunately is not deductible.

Listed Personal Use Properties. These possessions usually don’t depreciate in value. They can include artwork, jewelry, rare books or stamp and coin collections. Again the $1,000 Rule applies, however, in this case, losses can be deducted but only against other listed personal property gains of the year. If there are none, you can apply unabsorbed losses by carrying them back three years or forward seven years.

Excerpted from Jacks on Tax. © Knowledge Bureau, Inc. All rights reserved.