Home Office Loss When Home is Sold

If you recently sold or lost a home that included a home office, you may be wondering if you can deduct a loss related to the home sale.  

As unfair as it may sound, for tax purposes, the loss on the sale of personal use property is not deductible.  However, gains are taxable.  So, if your home had not been used for business purposes, you would not have a loss deduction.  If your home is used partly for business and the business portion is within the same structure (mixed-use property), then it is still treated as personal use property when sold.  Therefore, no loss is allowed.  However, if the business portion is in a separate structure, then the sale is treated partly as personal use (no loss allowed) and partly as business (losses allowed).  Let’s say you were using a separate guest house for business; the loss on that part of the sale would be allowed, just as the gain would be taxed without the benefit of the home gain exclusion had it been a gain.

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