Tax Center

Sponsored by

Use losses to offset gains on other properties

Dear Tax Talk,
I have deferred passive losses on multiple rental properties that have accumulated over the last eight years to the total of around $180,000. I recently sold two of these rental properties with a net capital gain of around $200,000. I have been getting conflicting answers as to whether I can offset these two sells with the cumulative passive losses of the other properties. I know that I can offset the individual losses on the two properties sold, but would like to cash in on the other losses at the same time.

Any help? Thank you.
-- Jerry

Dear Jerry,
Stop getting conflicting answers, and get a good CPA before you overpay your taxes. There is no gray area; your passive losses from any property or activity can go to offset income or gain from any other property or passive activity. This is true whether or not you dispose of the other properties and especially true when you do dispose of other properties.

When your adjusted gross income, or AGI (with certain modifications), exceeds $150,000, the tax law limits your losses from passive activities such as rental real estate. The losses instead are suspended and carried forward to future years, when your modified AGI allows you to claim them or if you have income, including gains, from sales of assets used in a passive activity.

In your case, your $200,000 in gain can be offset by all of your carryforward of $180,000, and you would end up with a net capital gain of $20,000. You should also be aware that capital losses from stock trading can offset the $200,000 in gain. If you have carryforward capital losses or losing stocks, you may want to get rid of them to increase your deductions.

Ask the adviser

To ask a question on Tax Talk, go to the "Ask the Experts" page and select "Taxes" as the topic. Read more Tax Talk columns.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

More From
View Comments (0)

Recommended for You

  • Play

    Treasure hunter who found a fortune in gold is captured

    COLUMBUS, Ohio (AP) — A treasure hunter accused of cheating his investors out of their share of one of the richest hauls in U.S. history — $50 million in gold bars and coins from a 19th-century shipwreck — was captured at an upscale Florida hotel after more than two years on the lam.

    Associated Press
  • Turkey's $7.9 Billion Mystery Money That's Simply Vanished

    Something bizarre is happening on Turkey’s accounting books, and nobody’s quite sure why. Turkey attracted $7.9 billion of income from unexplained sources during the first eight months of 2014, compared to an outflow of $90 million during the same period a year ago, according to the central bank…

  • Naomi Campbell steals show at couture as Bruni is mobbed

    PARIS (AP) — Singer Carla Bruni, actress Catherine Deneuve and burlesque performer Dita Von Teese were among regulars attending the spectacular displays at Paris' haute couture week Wednesday.

    Associated Press
  • Comcast Renames Man 'Asshole Brown' After He Tries to Cancel Cable

    Comcast probably doesn't relish being one of those companies that many Americans love to hate. Consider the case of Ricardo Brown. The disagreement happened when Brown's wife Lisa tried to cancel her cable. She got referred to one of the company's dreaded "retention specialists," who apparently…

  • Malaysia says MH370 crash an accident to clear compensation

    KUALA LUMPUR, Malaysia (AP) — Malaysia's government declared Thursday the crash of Flight 370 an accident to pave the way for compensation claims, angering victims' families still waiting for evidence while officials said the search for wreckage will go on.

    Associated Press
  • 5 Ways Saving Money Changes Your Life

    Working with a financial advisor might also become a better deal when you have more assets to invest. A financial advisor who is paid via a percentage of assets under management might be willing to provide lower fees to clients with more assets.

    U.S.News & World Report
  • Cramer: I've never seen anything like this

    In more than 30 years around Wall Street, "Mad Money" host Jim Cramer has seen a lot, but not this.

    CNBC Videos
  • Jim Cramer's Top Stock Picks: PG SWKS AAPL AEP MCD

    Cramer says Skyworks is on fire and Apple is the stock you own and don't trade.
  • Alibaba Drops On Revenue Miss, Margin Held Up, Mobile Mix Up

    Alibaba Group (BABA) reported mixed fourth-quarter earnings. Alibaba's top line missed. Gross merchandize value rose only 49% from a year ago, despite a strong Singles Day sale this year. Mobile contributed ...
  • ANALYST: China's 'Long-Awaited Day Of Reckoning' Is Almost Here

    All the devils have come together for the...

    Business Insider
  • Chevron & ExxonMobil: Time For Plan B?

    Citigroup's Alastair Syme and team worry that big-oil companies like Chevron (CVX), ExxonMobil (XOM), and ConocoPhillips (COP) might betting too much on a return to higher oil prices. They explain: Until now the industry’s Plan A to restoring profitability has been to rely on a return to higher oil…
  • McDonald's CEO steps down as sales decline

    NEW YORK (AP) — McDonald's CEO Don Thompson is stepping down as the world's biggest hamburger chain fights to hold onto customers and transform its image.

    Associated Press
  • World Wrestling Entertainment Can’t Pin Down Subscribers

    World Wrestling Entertainment Inc. (NYSE: WWE) announced on Tuesday that the company’s digital network had signed up its one-millionth subscriber, a target the company has long said it needed to reach ...

    24/7 Wall St.
  • Owners of Ohio mansion gutted by fire sue insurer for $60M

    CINCINNATI (AP) — The owners of a $4 million suburban mansion that burned to the ground last year are suing their insurance company for almost $60 million, saying it didn't honor their claims.

    Associated Press
  • Why You Should Think Twice Before Choosing a Roth IRA or Roth 401(k)

    Sure, Roth plans let your savings grow tax free. But if you're nearing retirement, a traditional pre-tax account may be the best choice.

  • Shell CEO Sees Oil at `Much Higher Levels' in Long Term

    Jan. 29 -- Royal Dutch Shell Plc Chief Executive Officer Ben Van Beurden said "the fundamentals of supply and demand will reassert themselves" and "oil prices will revert to much higher levels" in the long term. He spoke with Mark Barton on Bloomberg Television's "Countdown" after Shell reported…

    Bloomberg Video