Vacation Home Sale Loss Is Not Deductible

Vacation Home Sale Loss Is Not Deductible

A second home or vacation home is classified as personal property for income tax purposes and therefore any losses incurred from the sale of such property are not deductible on your personal income tax return. A loss on the sale of a rental home is a deductible loss on your tax return though.

This might make some feel tempted to try and classify their 2nd home as rental property when it comes time to sell at a loss without actually ever renting out the home.

In the following court case the Tax Court says not so fast!

A couple purchased a house and used it as a second home with their daughter for a few years. However, after their daughter died, they felt that they couldn’t stay there anymore and decided to rent out the home. They signed an agreement with a leasing agent, but the house was never rented out. Instead, the home was shown as a model unit until it was eventually sold. In the Court’s view, that level of activity wasn’t enough to show that the property was converted to a rental (Redisch, TC Memo. 2015-95).

 

If you have any questions about this or any other accounting related topic, please do not hesitate to contact us here at Shein & Wente CPA in Melbourne, Florida!