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Losses from rental properties 19 Jun 2019

The following is the proposed tax law, which has yet to be enacted. Some of it could be changed. 

As you will know, losses on residential rental properties may no longer be claimed as a deduction in your annual tax return.

They will have to be carried forward to the next year and set off against any rental profits in that year. Any surplus losses get carried forward again.

What happens when you sell your property? The losses can still not be claimed. Your only solution would be to buy another rental property. You would then be entitled to use those past losses as a deduction against profits on the new rental property.

If you own several properties, you can treat each separately, if you wish, but there doesn’t seem to be much achieved by doing this. If you do nothing they will be treated as a “portfolio” and you will be entitled to set off profits and losses on each of them against the others. Any surplus losses then get carried forward.

There are occasional situations where your rental losses can be set off against the profit on the sale of the property. This is only allowed if that profit on sale is taxable, i.e. not a tax-free capital gain.

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