Key Takeaways
- Condo sellers outnumbered buyers by 123% nationwide in September, the widest gap in Redfin’s records going back to 2013.
- A single 72-year-old who sells the condo she lives in at a $50,000 loss can’t deduct any of it, because a loss on a personal home isn’t deductible.
- The same $50,000 lost on shares in a taxable account would offset capital gains in full, or come off other income at $3,000 a year until it’s used up.
- The sale money isn’t taxed. If she gets a Form 1099-S, she still has to report the sale on Form 8949.
Selling a condo this fall means fighting a lot of other sellers for not many buyers. There were 123% more condo sellers than buyers nationwide in September, according to Redfin, the widest gap in its records going back to 2013. Rising HOA fees, special assessments and insurance bills have made condos costlier to own, and buyers have pulled back.
Prices have held up better than that might suggest, with the median condo selling for about $339,000 in September, down 0.8% from a year earlier. But if you’re a retiree who has to take a lowball offer to get out, a tax rule makes a bad sale worse.
A $50,000 loss, and nothing to show for it
Let’s take a hypothetical single 72-year-old selling the condo she lives in. Maybe she bought near a local peak, or her condo association just hit owners with a big special assessment, and the best offer she can get leaves her with a $50,000 loss. Ouch.
If she’d lost the same $50,000 on shares in a taxable brokerage account, it would at least have cut her tax bill. On the condo, she gets no deduction at all.
6 safe dividend stocks paying retirees 6%+ yields
There are over 100 stocks paying 6%+ annual dividends today.
But after an extensive investment review leveraging TIKR’s proprietary data, we now believe only six of them are truly safe for retirees.
They’re all yours for free as part of our new investment report, which you can access right here.
Your home counts like your car
A loss on selling the home you live in isn’t deductible. The IRS puts a home in the same group as a car: personal-use property, where losses don’t count. So her $50,000 can’t offset capital gains or other income. The one consolation is that she owes no tax on the money she gets from the sale.
Her loss is what she realizes on the sale, after selling costs like the agent’s commission, minus her adjusted basis. So the commission only makes the loss bigger, and none of that is deductible either.
Gains get a much kinder deal. If she’d sold for more than she paid, she could keep up to $250,000 of the gain tax-free as a single filer, as long as she’d owned the condo and lived in it for at least two of the last five years. Uncle Sam takes no share of most home-sale gains, and he doesn’t share in the losses either.
The same loss on stocks would count
Capital losses on investments in a taxable account first offset capital gains, with no limit. So if she’d also sold other investments for $50,000 of gains this year, the loss would cancel all of them. With no gains to offset, she could take $3,000 a year off her other income and carry the rest forward to later years until it’s used up.
At $3,000 a year, working through $50,000 would take about 17 years, so she’d be pushing 90 before the last of it came off. And her estate can’t carry over any loss still unused when she dies. That’s still a lot better than nothing.
Who’s most likely to get stuck
I suspect most longtime condo owners are still sitting on gains, and the home-sale exclusion covers most of those. The sellers most at risk of a loss bought in the last few years, or own in metros where sellers swamp buyers. In San Antonio, Redfin counted more than five condo sellers for every buyer in September. A retiree who downsized into a condo there a few years ago is exactly the kind of seller who could end up with a loss like hers.
What a seller can do about it
Not a lot, sadly. If she gets a Form 1099-S at closing, she still has to report the sale on Form 8949, even with no taxable gain to report. Reporting it doesn’t make the loss deductible.
Her real choice is when to sell. Waiting means more HOA fees, more insurance bills and maybe another special assessment, the same costs keeping buyers away. Selling now means taking a loss she’ll never get a tax break for.
The way I see it, she has no tax reason to rush and no tax reason to wait. A losing stock sold this year can cut this year’s taxes, but her condo’s loss is worth nothing whenever she takes it, so she can decide on the price and the cost of holding on alone. Redfin’s next read on the condo market will show us whether the gap between sellers and buyers is still widening. If it is, I’d expect more sellers to cut their prices, and more retirees to learn about this rule the hard way.
Enjoy your retirement in style with these safe 6%+ dividend yields
Dividends can hold the key to enormous wealth. But only if you buy the right ones.
Picking the right high-yield dividend stock can be the difference between a dream retirement…and scraping by every month, waiting for the next Social Security check to clear.
We’ve identified six stocks yielding 6%+ that we believe every retiree should know about right now.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
