If I sell my cottage at a loss can I deduct the loss? The cottage is not my personal residence and I have never rented it. If I sell it for a gain, is it taxable?

ANSWER

The BIDaWIZ Team's Answer:

If you sell your cottage at a loss, it will not be a tax deductible expense. Per Internal Revenue Code Section 165(c) and IRS Publication 523, a loss on the sale or exchange of personal use property is not deductible. Only losses associated with property used in a trade or business and investment property are deductible. If you sell your cottage at a gain, it may be taxable depending on your adjusted gross income, including the gain on the sale. If you're in the 15% or lower ordinary income tax bracket, you will not owe any long-term capital gains tax. However, if you're in the 25% to 35% ordinary income tax bracket, you'll be subject to 15% in federal taxes on the long-term capital gain. If you're in the 39.6% ordinary income tax bracket, you'll be subject to 20% in federal taxes on the long-term capital gain. It's important to note that you may also be subject to 4.3% in Michigan state taxes.