Ask the tax adviser
By George Saenz • Bankrate.com

Tax break for home sale loss?

Dear Tax Talk:
If I buy a home and paid too much, i.e., $100,000, and sell for $90,000, is there any favorable tax event for me?
Thanks,
Don

Dear Don:
If you bought the home and used it as your home, the loss on the sale of the property is not deductible. If you bought the home for investment purposes and did not use it personally or immediately rented it out, then you would be able to deduct the loss. If you used the house as your home and then decided to rent it out, the lower of the cost of the home or its value when you converted its use is the basis for computing depreciation deductions and calculating loss on the sale.

So unfortunately, Don, there is nothing that can be done to convert the loss to a favorable tax event if you used the property personally. More on home sales and taxes can be found at the Bankrate.com tax tip.

Second home mortgage

Dear Tax Talk:
We are claiming the interest on the mortgage on our home. Are we allowed to add the amount of interest paid on our time-share?
Rosemary

Dear Rosemary:
Interest paid on loans secured by mortgages on your main home or a second home qualifies for the home mortgage interest deduction. A second home is another home that you use for personal purposes during the year.

If you rent out the second home and do not use it during the year, then it is not a second home for the purpose of the home mortgage interest deduction. The property would either be investment property if not rented or rental property if rented. If the property is part personal and part rental, then you will be able to treat it as a second home if the personal use exceeds the greater of 14 days or 10 percent of the time it was rented.

In the context of the time share, let me give you an example where it would be a second home and not a rental. Let's assume you are entitled to four weeks at the property. You use it three weeks and rent it the fourth. The time share is a second home, as you used it more than 14 days.

A second home can include a time-share unit, a boat or a recreational vehicle, with sleeping, cooking and toilet facilities. Interest paid on your time-share is deductible if you meet these prescribed tests.

-- Posted March 7, 2000

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