Q: My wife and I sold our home last year. We lived in the home for 21 years, and our investment plus improvements to the home add up to about $151,000.
We sold the home for $131,000.
Can this be considered a loss for Federal Income tax purposes?
A: Unfortunately, a loss on the sale of a primary residence is not deductible on your Federal income tax return. The Federal tax code only has provisions for you to benefit from the sale of your primary residence if you make money on the sale.
If you had turned a profit on the sale of your home, you would have been able to exclude from up to $500,000 of profit from the sale ($250,000 for a single person). But in the case of your loss, you can’t deduct it.
This is different from the loss on the sale of other investments, like stocks. If you bought a stock for $5,000 and sold it for $3,000, you could use the $2,000 loss to offset some other investment gain. And if you didn’t have any other gains that year, you could carry forward the loss for several years until you did have a long-term capital gain.
For more information, talk to your accountant or tax preparer.
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