Q: What happens when you sell an investment property at a loss? Can the loss be claimed on your federal or state incomes taxes?
On an income tax return, can you deduct rental and management company fees?
A: How rental properties affect income taxes pose quite a number of tricky questions. As a general rule, costs relating to the ownership, maintenance and leasing of your property offset any income from the property. If you have costs that exceed your income, you have a loss.
If real estate is your full-time profession, you can fully deduct your loss from your income taxes. If you are not in the real estate business you will be limited in the amount of money you can deduct as a loss from your income taxes.
You should consult with an accountant to assist you in sorting out all of your expenses and determine the loss from the investment property.
May 20, 2006.