Can I take a loss on my taxes if I sold a home with a depreciated HVAC system?

by Christopher C. Humes, CPA | Jan 25, 2018
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I bought a house in 2008. I then got married and moved to another city and rented out the house from 2010 on. I reported rental income every year and depreciated the HVAC for the last few years. I sold the house in 2017 (no rental income in 2017). From my figures, in totality, I will take a loss on this sale. Can I take a loss on my income tax return for this?

Since you converted the home to a rental property in 2010, you can reduce your federal taxable income by the amount of the loss. It is not considered your primary residence because you did not reside there in the past five years.

Because you took depreciation on the house, you will need to take that into account as well. You will start by reporting the transaction on Form 4797. The loss will then flow to Line 14 of Form 1040 as other gain/loss.

For Pennsylvania, your loss is potentially deductible if you happen to have another transaction that resulted in a gain (i.e., a sale of securities). Pennsylvania does not permit losses in one category of income as reported on Form PA-40 to be offset against income in another class of income, such as wages, interest, dividends, etc.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Christopher C. Humes, CPA, is with Baker Tilly Virchow Krause LLP in Wormleysburg, Pa.

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The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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