I live in Illinois and own a townhome. My family lived in the home in the home for seven years before renting it out (Sept. 2003 - Oct. 2010). The purchase price was $223,000. We did not put any money towards improvements/remodeling. The value of the home when converted into rental property was $182,674 ($154,937 home + $27,737 land). The fair market value of the home is now $155,000. We have been reporting the home as a rental property on our tax return via schedule E. The home has been paid off. How do we calculate the loss?

ANSWER

The BIDaWIZ Team's Answer:

On the sale of rental property, you can likely claim an ordinary loss as the expected sale price of $155,000 is less than the fair market value of $182,674 at the time the house was converted to a rental property. Ordinary losses can offset ordinary income (i.e wages, salaries, commissions). Please note that the cost basis should also be reduced for depreciation over the years. Do you need a tax professional to help you with reporting the sale. If so, you can submit a request here to work with a tax professional online