What are your legitimate real estate deductions? Mortgage? Renovations? Vacation homes?
What is your tax liability When You Sell Your Home at a Loss?
You can only claim a tax loss on investment property. A loss on a personal residence is considered to be a nondeductible personal expense for federal income tax purposes.
If you're fortunate, the lender could decide to forgive some or all of the unpaid mortgage in a short sale,
But what happens tax-wise if the mortgage lender forecloses? Here is the general rule. Say your property is foreclosed (or transferred to the lender via a deed in lieu of foreclosure). When the mortgage debt exceeds the property's fair market value (FMV), the transaction is treated as a sale for a price equal to FMV. Naturally, the sale will trigger a tax gain if the FMV exceeds your tax basis in the home.
The important thing to understand here is that a real estate short sale or foreclosure can potentially result in a taxable gain and/or taxable DDI. That's the bad news. The good news is that you can probably exclude the gain from taxation, and you might be able to exclude some or all of the DDI too.
Please print:
Taxes When You Sell Your Home at a Loss
http://www.smartmoney.com/taxes/income/taxes-when-you-sell-your-home-at-a-loss-21058/#printMode
9 Documents That Help You Reap Real Estate Tax Breaks
5 homeownership tax myths
http://realestate.msn.com/article.aspx?cp-documentid=13107829
What to do if your house is losing money http://www.realtor.com/home-finance/real-estate/general/what-to-do-losing-money-on-home.aspx?source=web
