From: New York
Dear TaxMama,
For tax purposes, what can I do after I sold my car at a loss?
Also,what can I do after I sold my house at a loss?
Can I use these two losses as deductions on my tax return?
According to the definition of capital assets in 1221 of the Code, depreciable
property or real preperty used in a trade or business of the taxpayer is not
a capital asset. Therefore, I wonder if any gain or loss resulting from the
sale of my house should be classified as capital gain or loss.
Shuo-Fu
Dear Shuo-Fu
If your home and your car are personal assets, unfortunately, you don't
get to take any deductions for selling them at a loss.
In other words, if you lived in the house you sold, rather than renting
it out, collecting rent and reporting the income, it's home. No deductions
for losses.
Even if you ran your business from your home, there's a special provision
in the tax code that came in a couple of tax acts ago. People who ran home-based
businesses no longer had to report the gain on the sale of that portion of
their home. All they had to do was to report their depreciation and pay capital
gains tax on that.
So, you won't get to report the loss from the sale of business property
for an office in home.
You could try, but that would be pushing it.
Even if you do report the loss, it will only be on that percentage of the
home that you used for business.
So, if you reported a 15% office in home deduction ON YOUR TAX RETURN,
you might be able to report the loss on only 15% of your home.
It's complicated and apt to attract an audit. And remember, you've taken
deprecation, so that will reduce your loss.
As to the car, if you used it for business, you might be able to report
the loss.
But, then the question arises, DID you have a loss? When you take into
account the depreciation on the car, you might actually have a profit on
the sale.
Even if you used the mileage method to report your auto expenses, that
method includes at least 11 cents, or more, of depreciation, per mile.
You're trying hard to learn about the tax laws. Clearly, you're interested.
Have you ever thought of taking a tax course? You'd be good at this!
Check with a university near you.
Nothing is simple, nothing!
Best wishes,
Eva Rosenberg, MBA, EA
