Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 02-03-2014, 12:48 PM
Junior Member
 
Join Date: Feb 2014
Posts: 2
Real Estate loss deduction - business

Self employed real estate agent- business income from transaction commissions, rentals, and property purchase resales. Bought investment home in 2007 and rented it out for last 6 years, sold it in 2013 for a $42,000 loss. Thought it would deduct off my schedule C income since it is part of my business activity and reduce my self employment tax among other benefits. Tax software is subtracting loss from my married joint filed income on front page of 1040. Is that correct or am I not entering it properly? Thanks, first time taking a loss on a sale so new to me.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 02-03-2014, 01:57 PM
Moderator
 
Join Date: Oct 2010
Posts: 4,803
Quote:
Originally Posted by AllenC View Post


#1;Self employed real estate agent- business income from transaction commissions, rentals, and property purchase resales. Bought investment home in 2007 and rented it out for last 6 years, sold it in 2013 for a $42,000 loss. Thought it would deduct off my schedule C income since it is part of my business activity and reduce my self employment tax among other benefits.


#2;Tax software is subtracting loss from my married joint filed income on front page of 1040. Is that correct or am I not entering it properly? Thanks, first time taking a loss on a sale so new to me.
#1;The sale of any business property is reported on Form 4797. Residential real estate is reported in Section III as it is Section 1250 property subject to special depreciation recapture rules UNLESS it takes a loss. As you said, the IRS uses different loss rules to limit the types and amount of losses deducted for rental properties. The tax savings realized through a tax loss may be used to offset income such as self-employment income reported on Sch C /SE.pleaseremember; The loss, ordinary biz loss, not non-biz cap loss, is deducted against your gross income; As you take a loss on the sale of the rental pty, you do not need to recapture the unrecaptured sec 1250 deprec. taxed at an ordinary tax rate.the losson the sale will be treated as an ordinary loss in the year that you sell the property.also, Carryover losses also will be allowed as a deduction upon the sale as ordinary loss by being reported on 1040 line 14.






#2;i m not familiar with the software hiowever,As it is reported on 1040 line 14 as ordinary loss, it reduces your total income on line 22 and AGI on 37, TI on line 43, and your tax liability on line 44.

Note;
When you own property and use it as your primary residence, the IRS does not allow you to take a deduction when you sell it at a loss. To take a capital loss on property, you have to own it as an investment property. For example, if you have a rental property and its value declines before you sell it, the IRS will then let you take a deduction based on the loss amount.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 02-04-2014, 01:09 PM
Junior Member
 
Join Date: Feb 2014
Posts: 2
rental loss

Quote:
Originally Posted by Wnhough View Post
#1;The sale of any business property is reported on Form 4797. Residential real estate is reported in Section III as it is Section 1250 property subject to special depreciation recapture rules UNLESS it takes a loss. As you said, the IRS uses different loss rules to limit the types and amount of losses deducted for rental properties. The tax savings realized through a tax loss may be used to offset income such as self-employment income reported on Sch C /SE.pleaseremember; The loss, ordinary biz loss, not non-biz cap loss, is deducted against your gross income; As you take a loss on the sale of the rental pty, you do not need to recapture the unrecaptured sec 1250 deprec. taxed at an ordinary tax rate.the losson the sale will be treated as an ordinary loss in the year that you sell the property.also, Carryover losses also will be allowed as a deduction upon the sale as ordinary loss by being reported on 1040 line 14.






#2;i m not familiar with the software hiowever,As it is reported on 1040 line 14 as ordinary loss, it reduces your total income on line 22 and AGI on 37, TI on line 43, and your tax liability on line 44.

Note;
When you own property and use it as your primary residence, the IRS does not allow you to take a deduction when you sell it at a loss. To take a capital loss on property, you have to own it as an investment property. For example, if you have a rental property and its value declines before you sell it, the IRS will then let you take a deduction based on the loss amount.

So in a nutshell, is my investment rental house sales loss taken off against schedule C income before being brought forward to line 12 on the 1040? Hope so. Thanks,



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 02-04-2014, 01:18 PM
Moderator
 
Join Date: Oct 2010
Posts: 4,803
Quote:
Originally Posted by AllenC View Post
So in a nutshell, is my investment rental house sales loss taken off against schedule C income before being brought forward to line 12 on the 1040?
no; as mentioned previously, the the rental house losses are NOT reported on Sch C but on form 4797 line 18b and are reported on 1040 line 12 as negative amount and it decreases your gross incomr/ AGI/TI on 1040.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Additional Standard Deduction for Real Estate Taxes Samatg Homeowner Tax 1 01-16-2015 01:33 AM
Commuting, business and personal miles for passive real estate? Help! Big Ed Rental Real-Estate 1 08-15-2013 03:11 AM
Additional Standard Deduction for Real Estate Taxes Samatg For 2009 5 04-01-2011 01:55 AM
real estate agent deduction repro Itemized Deductions 1 11-02-2010 03:26 PM
Prior year carry over loss for Rental Real Estate jbbryant Rental Real-Estate 1 02-06-2009 09:17 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning