Can I claim a loss on the sale of a property I held for investment after moving out? Not using as a second home.

This is a really interesting situation that falls into a bit of a gray area, but I think there's a good case for treating this as an investment property loss. When you moved out of your city apartment and into your suburban home, your primary residence clearly changed. Then, by staging the apartment and holding it solely to sell at a better price without any personal use, you effectively converted it from a personal residence to a property held for investment purposes. The key here is your intent. You weren't holding it as a second home or vacation property - you were holding it purely as an investment asset hoping for market recovery. The fact that you were contractually prohibited from using it due to the staging agreement further supports this classification. If you can document that your intent was investment purposes (staging contracts, listing communications, etc.), you should be able to claim this as a capital loss on Schedule D. The loss would be calculated as the difference between the adjusted basis (purchase price plus improvements minus depreciation) and the sale price (minus selling expenses). The HOA fees and carrying costs during the holding period would generally be considered investment expenses reportable on Schedule A, subject to the 2% floor for miscellaneous itemized deductions.

I was in almost the same situation last year and found https://taxr.ai super helpful for getting clarity. After COVID hit, I moved to a different state but kept my old place hoping prices would rebound. My CPA was giving me conflicting advice about whether I could claim the loss. I uploaded my documents to taxr.ai including the sale paperwork, staging receipts, and emails with my realtor discussing the investment strategy. It analyzed everything and confirmed I could claim the investment loss since I had clearly converted the property from personal to investment use. The analysis cited relevant tax code sections and even provided IRS publication references that addressed my exact situation. Saved me thousands and gave me the confidence to claim the loss properly. Might be worth checking out since your situation has all those detailed nuances that aren't always straightforward.

I wanted to follow up after trying taxr.ai for my situation. I'm honestly surprised at how helpful it was. After uploading my closing documents from both properties, the staging contract, and some emails with my agent, I got a comprehensive analysis that addressed my exact situation. The service cited Revenue Ruling 84-110 and Bolaris v. Commissioner which directly applied to my case about converting a personal residence to property held for investment. It explained that I needed to establish clear investment intent (which the staging contract helped prove) and that the significant holding period with no personal use strengthened my position. The analysis even provided specific guidance on how to report everything on my tax forms with the proper codes. My accountant was really impressed with the documentation it provided to support the loss claim. Definitely worth it for complicated tax situations like this.

After dealing with a similar property loss situation last year, I spent WEEKS trying to get through to someone at the IRS who could actually answer my question. Kept getting disconnected or waiting on hold for hours only to talk to someone who gave vague answers. Finally found https://claimyr.com and used their service to get connected to an IRS agent in about 17 minutes instead of the 3+ hours I had been waiting. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to speak directly with an IRS specialist who confirmed that my property could be classified as investment property based on my intent and lack of personal use after moving out. They walked me through exactly how to document everything and what forms to use. Honestly changed my whole perspective on dealing with the IRS.

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to resolve a property classification issue similar to the original post. Using the service got me connected to an IRS specialist in about 20 minutes. The agent confirmed that a property held for investment purposes after moving out (with no personal use) can be treated as an investment property, allowing me to claim the loss on Schedule D. They also clarified that I needed to document the "conversion" from personal use to investment use through things like the staging contract, utility records showing minimal usage, and communications with my realtor about market timing strategy. The information I got was specific and actionable, saving me thousands in taxes. And I didn't have to waste an entire day on hold. Never thought I'd say this about anything tax-related, but this was actually a pleasant experience.

Have you checked IRS Publication 523? There's a section about "property used partly as home and partly for business" that might apply to your situation. As I understand it, since you converted your former personal residence to an investment property, the loss is generally deductible as a capital loss. The most important thing is going to be documenting when and how you converted the property from personal to investment use. The staging contract is excellent evidence of this. Also helpful would be any emails with realtors discussing your strategy of waiting for the market to improve, utility bills showing minimal usage, etc. The property wasn't a "second home" in the tax sense because you never used it personally after establishing your new primary residence. You were essentially holding an investment asset.

one other thing to consider is the state tax implications. Some states hav different rules for investment property losses than the federal government. I had a similar situation in California and was able to deduct the loss federally but not on my state return because they had different standards for what constituted an investment property vs personal residence. might want to check your state rules too.

Based on everything discussed here, it sounds like you have a strong case for treating this as an investment property loss. The key factors working in your favor are: 1) Clear establishment of a new primary residence when you moved to the suburbs, 2) Zero personal use of the downtown condo after moving out, 3) Documentation showing investment intent (the staging contract prohibiting personal use is particularly compelling), and 4) The 15-month holding period demonstrating you were waiting for market conditions to improve. For reporting, you'll use Form 8949 and Schedule D to claim this as a long-term capital loss. The $95,000+ loss is substantial and can offset other capital gains or up to $3,000 of ordinary income annually (with carryforward for the remainder). Don't forget that your selling expenses and some of the carrying costs during that 15-month period may also be deductible. I'd recommend keeping detailed records of everything - the staging contract, utility bills showing minimal usage, communications with your realtor about market timing, and any other evidence that supports your investment intent. This documentation will be crucial if the IRS questions the classification. Given the complexity and the large loss amount, it might also be worth having a tax professional review your specific situation to ensure everything is reported correctly.