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Finding Real Life Solutions To Your Tax Problem

Before you sell your house at a loss, read this

| Nov 5, 2015 | Uncategorized |

Imagine you want to sell your house. It is ten years old, meaning that you bought it near the height of the market and before the epic crash of 2007. You loved living there and the memories are still solid, but now it is an albatross that prevents you from getting over other financial issues in your life. A sale would be beneficial not because you taking troublesome debt off your hands, but you may even benefit from a tax break by selling the property at a loss.

This is how it is supposed to work, right?

You may be surprised that you may not realize that tax break you depended on. Under Section 262 of the Tax Code, no deductions are allowed for personal, living or family based expenses. So the value of that home you lost, you may not be able to claim it as a loss on your return.

Before you cringe, consider this. If the home was purchased originally for personal use, but you later rented it out after you moved, selling it at a loss could be viewed differently. Essentially, Section 165 allows for deductions for “any loss sustained that is not compensated for.” This means that a loss incurred in “any transaction entered into for a profit.” Simply put, a personal dwelling does not fit the description of a transaction entered into for a profit. Conversely, a rental property is a transaction that fits the description because people buy them as a way to make money.

So before you sell that house that is troubling you, consult with an experienced tax attorney

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