If I take a capital loss when I sell my home, I can write it off. This myth, like No. 2, was probably started by wishful homeowners. Sorry, it's just as wrong. It is true that real estate, like any other asset, has the potential to go down as well as up in value. But unlike most of those other holdings, you cannot write off any loss you suffer if you must sell your main residence for less than what you paid. That's because your residence, under tax law, is considered personal property. "When you sell your home for a loss, it's not like other capital items," says Scharin. "You don't get to deduct personal property that you sell for a loss." "It's the same as any personal property that declines in value," says Luscombe, "like that old TV you sold to the neighbor kid so he could take it to college. You sold it for much less than you paid, but you can't take a loss." You do, however, have to pay tax on gains you make when selling personal property. But at least you now know the difference between fact and fiction when it comes to your residential property, which will help you make appropriate real estate and tax decisions in the future.
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