Do People Who Sell Their Main Home at a Loss Pay Capital Gains Tax?

Do People Who Sell Their Main Home at a Loss Pay Capital Gains Tax?

Do People Who Sell Their Main Home at a Loss Pay Capital Gains Tax?

Taxpayers who sell their main home for a loss generally do not pay any tax on the money received, but the loss cannot be deducted from other taxable income, according to the Internal Revenue Service. IRS Publication 523 provides worksheets for calculating cost basis and gain or loss.

Other tax considerations exist for homes sold below their purchase price, warns the IRS. If the house was used as rental property, or if part of it was a business office in home, the cost basis has to be adjusted for depreciation. Taxpayers who received a homebuyer's credit in 2008 may have to recapture part of the credit. Homes sold for less than the mortgage balance may have cancellation of debt income.