A capital loss is the negative difference between the purchase price (adjusted for improvements and depreciation) and the selling price of an asset. For real estate investors, these losses can be used to offset capital gains.
How It Applies to Florida Landlords
If you sell a rental property at a loss, you may deduct that loss against your other capital gains for the year. If your losses exceed your gains, you can generally deduct up to $3,000 of the excess against your ordinary income, carrying the remaining amount forward to future tax years. Proper documentation of the property’s basis is essential to proving the loss to the IRS.
Key Takeaways
- Capital losses help offset capital gains tax liabilities.
- Unused losses can often be carried forward to subsequent tax years.
- Accurate records of capital improvements are required to calculate the exact loss amount.