Sale of second home is subject to capital gains tax

Need help with your taxes? will publish a reader's question and the answer from a member of the American Institute of Certified Public Accountants (AICPA) every weekday until April 15. Today's question:

Q: I have a second house that I plan to sell. I will have owned this home for more than 12 months, which should qualify it for the 15% capital gains tax. I also have stock that I can sell with a long-term capital loss. Can I apply the long-term capital loss for my stock against the long-term capital gain for my second home?

Answer from AICPA member Norman S. Solomon:A second home, not used for business, is a capital asset in the hands of the owner.

If that property is held for more than one year and is sold at a gain, such gain will be taxed as long-term capital gain subject to a maximum federal tax rate of 15% (although a 0% rate exists for certain low income taxpayers in 2008, 2009 and 2010).

A capital gain may be offset on a dollar-for-dollar basis by deductible capital losses.

Therefore, capital losses from stock sales may offset the gain from the sale of the second home.

Furthermore, losses of up to $3,000 (on a joint return) in excess of the reported capital gain may be deducted against ordinary income. (There may be different rules for state tax reporting purposes.)

For more information:

IRS Publication 523: Selling Your Home (pdf)

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