Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

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Rowan Oak
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Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Rowan Oak » Mon Dec 24, 2018 11:12 am

I sold a rental property in 2018 for an ordinary loss of $70,719 . I'm trying to figure out how this loss will be applied to my 2018 taxes. Will 100% of the $70,719 be deducted from my 2018 total income or is there a limit similar to the $3000 max for realized losses in a Vanguard taxable account?

Any help is appreciated . Thanks

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foosball
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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by foosball » Mon Dec 24, 2018 12:28 pm

Did you hold the rental property for longer than one year? If so, that loss is likely a long-term capital loss. Long-term capital losses can be used to offset long-term capital gains (this is not the same thing as your wage income). Did you for example sell any equities for a profit that you held for longer than one year, or receive any long-term capital gains from a fund that you own? If so, the loss on your rental property can offset those capital gains.

Edit: I'm sorry, I gave you incorrect information. See replies below.

If you have additional long-term capital losses beyond those offsets, you can use up to $3000 of those per year to reduce your ordinary income. Whatever loss remains can be carried forward to next year and beyond.

Disclaimer: I'm not an accountant.
Last edited by foosball on Mon Dec 24, 2018 3:00 pm, edited 1 time in total.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Rowan Oak » Mon Dec 24, 2018 12:39 pm

Yes, I owned the rental property (single family house) for over 10 years.

No capital gains in Vanguard taxable account this year. Actually, I've tax loss harvested over $10,000 in losses in 2018.
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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Kagord » Mon Dec 24, 2018 12:50 pm

LoL, I have the opposite question, I have rental property with big time appreciation, the run up from 2008 crash is unreal and I'm concerned. I want to transition to the Boglehead's portfolio, but don't think that's a like kind, 1031 or whatever term you call it exchange.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by stats99 » Mon Dec 24, 2018 1:36 pm

Have you also accounted for Depreciation recapture?

MarkNYC
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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by MarkNYC » Mon Dec 24, 2018 1:49 pm

foosball wrote:
Mon Dec 24, 2018 12:28 pm
Did you hold the rental property for longer than one year? If so, that loss is likely a long-term capital loss. Long-term capital losses can be used to offset long-term capital gains (this is not the same thing as your wage income).
It will not be taxed as a capital loss. It will be a Sec 1231 loss, which will be taxed as an ordinary loss that can be deducted against other ordinary income.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by MarkNYC » Mon Dec 24, 2018 1:51 pm

stats99 wrote:
Mon Dec 24, 2018 1:36 pm
Have you also accounted for Depreciation recapture?
Why do you believe depreciation recapture will apply if the property is sold at a loss?

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by DetroitRed » Mon Dec 24, 2018 2:59 pm

MarkNYC wrote:
Mon Dec 24, 2018 1:51 pm
stats99 wrote:
Mon Dec 24, 2018 1:36 pm
Have you also accounted for Depreciation recapture?
Why do you believe depreciation recapture will apply if the property is sold at a loss?
Are you calcing your basis correctly for the $70,719 loss calculation? Your basis is reduced by the amount of depreciation you have taken.
Last edited by DetroitRed on Mon Dec 24, 2018 3:06 pm, edited 1 time in total.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by foosball » Mon Dec 24, 2018 3:02 pm

MarkNYC wrote:
Mon Dec 24, 2018 1:49 pm
foosball wrote:
Mon Dec 24, 2018 12:28 pm
Did you hold the rental property for longer than one year? If so, that loss is likely a long-term capital loss. Long-term capital losses can be used to offset long-term capital gains (this is not the same thing as your wage income).
It will not be taxed as a capital loss. It will be a Sec 1231 loss, which will be taxed as an ordinary loss that can be deducted against other ordinary income.
Ugh, I'm sorry. I forgot that these are treated differently. Thanks for replying with the correct information

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Rowan Oak » Mon Dec 24, 2018 3:03 pm

Yes, the "ordinary loss of $70,719" is after accounting for depreciation recapture.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by MarkNYC » Mon Dec 24, 2018 3:09 pm

DetroitRed wrote:
Mon Dec 24, 2018 2:59 pm
MarkNYC wrote:
Mon Dec 24, 2018 1:51 pm
stats99 wrote:
Mon Dec 24, 2018 1:36 pm
Have you also accounted for Depreciation recapture?
Why do you believe depreciation recapture will apply if the property is sold at a loss?
Are calcing your basis correctly for the $70,719 loss calculation? Your basis is reduced by the amount of depreciation you have taken.
Yes, basis must be reduced when calculating the gain/loss, but "depreciation recapture" refers to the portion of the gain that is subject to a special tax rate. ("depreciation recapture" isn't really the correct term in this situation, it should be "unrecaptured 1250 gain")

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Scrapr » Mon Dec 24, 2018 5:03 pm

Abit impolite to ask. But I will anyway. How did you have a $70k loss including the depreciation recapture? That must have been a $130k loss on sale. The RE market has been pretty good in most markets. A special local situation?

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by lakpr » Mon Dec 24, 2018 7:23 pm

I am not the OP, but there's a reply above that the property was held over 10 years. So the property must have been bought before the Great Recession. Quite possible that the local real estate still haven't recovered to the original purchase price.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by TIAX » Mon Dec 24, 2018 8:42 pm

Rowan Oak wrote:
Mon Dec 24, 2018 11:12 am
I sold a rental property in 2018 for an ordinary loss of $70,719 . I'm trying to figure out how this loss will be applied to my 2018 taxes. Will 100% of the $70,719 be deducted from my 2018 total income or is there a limit similar to the $3000 max for realized losses in a Vanguard taxable account?

Any help is appreciated . Thanks
According to all the threads here, no one loses money on rental property. Maybe you meant gain?

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Rowan Oak » Thu Jan 10, 2019 9:05 am

So this will be an "ordinary loss" and I will be able to deduct from income? No limits?

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by aristotelian » Thu Jan 10, 2019 9:23 am

Rowan Oak wrote:
Thu Jan 10, 2019 9:05 am
So this will be an "ordinary loss" and I will be able to deduct from income? No limits?
Rather than answer your question, this is a case where I would go to a tax pro. You are about to claim a deduction of $70k. You want to make sure it is done correctly. It is possible you could claim more. Don't get me wrong, I am a big proponent of DIY taxes.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Rowan Oak » Thu Jan 10, 2019 9:28 am

aristotelian wrote:
Thu Jan 10, 2019 9:23 am
Rowan Oak wrote:
Thu Jan 10, 2019 9:05 am
So this will be an "ordinary loss" and I will be able to deduct from income? No limits?
Rather than answer your question, this is a case where I would go to a tax pro. You are about to claim a deduction of $70k. You want to make sure it is done correctly. It is possible you could claim more. Don't get me wrong, I am a big proponent of DIY taxes.
Thank you. I definitely agree. In addition to this issue I am also a small business owner and my current tax situation is a little too complex for DIY at least for me.

I am primarily asking the Bogleheads so I can go in to the meeting with my CPA knowing the answer already. I have found it is a big mistake to assume your CPA actually knows what they are doing. True for all professionals to some degree.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Broken Man 1999 » Thu Jan 10, 2019 9:39 am

Rowan Oak wrote:
Thu Jan 10, 2019 9:28 am
aristotelian wrote:
Thu Jan 10, 2019 9:23 am
Rowan Oak wrote:
Thu Jan 10, 2019 9:05 am
So this will be an "ordinary loss" and I will be able to deduct from income? No limits?
Rather than answer your question, this is a case where I would go to a tax pro. You are about to claim a deduction of $70k. You want to make sure it is done correctly. It is possible you could claim more. Don't get me wrong, I am a big proponent of DIY taxes.
Thank you. I definitely agree. In addition to this issue I am also a small business owner and my current tax situation is a little too complex for DIY at least for me.

I am primarily asking the Bogleheads so I can go in to the meeting with my CPA knowing the answer already. I have found it is a big mistake to assume your CPA actually knows what they are doing. True for all professionals to some degree.
Wow!

Sounds like you need to screen your professionals a bit better, no?

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by renue74 » Thu Jan 10, 2019 9:49 am

TIAX wrote:
Mon Dec 24, 2018 8:42 pm
Rowan Oak wrote:
Mon Dec 24, 2018 11:12 am
I sold a rental property in 2018 for an ordinary loss of $70,719 . I'm trying to figure out how this loss will be applied to my 2018 taxes. Will 100% of the $70,719 be deducted from my 2018 total income or is there a limit similar to the $3000 max for realized losses in a Vanguard taxable account?

Any help is appreciated . Thanks
According to all the threads here, no one loses money on rental property. Maybe you meant gain?
Accidental landlords lose money on their "rentals" all the time.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by fujiters » Thu Jan 10, 2019 11:34 am

Scrapr wrote:
Mon Dec 24, 2018 5:03 pm
Abit impolite to ask. But I will anyway. How did you have a $70k loss including the depreciation recapture? That must have been a $130k loss on sale. The RE market has been pretty good in most markets. A special local situation?
My thoughts exactly.
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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Buford T Justice » Thu Jan 10, 2019 1:24 pm

Hope it was an arm's length sale.

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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by EdNorton » Thu Jan 10, 2019 2:22 pm

How much did you pay for the rental house?

What did you sell the house for?

Unless the house sold for 66% or less of what you paid for it, you probably don't have a loss (assuming 1/3 depreciation).
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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by LadyGeek » Thu Jan 10, 2019 3:53 pm

This thread is now in the Personal Finance (Not Investing) forum (rental property).
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Re: Sold a rental property for an "ordinary loss of $70,719" in 2018 - how will this affect taxes?

Post by Rowan Oak » Thu Jan 10, 2019 5:48 pm

The $70,719 ordinary loss is after accounting for depreciation recapture. The house (single family home) was a rental for over 10 years.

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