My husband and I built a new home four years ago and sold it this year at a loss of around $35,000. My taxman said we can’t deduct this. Is he correct?

My husband and I built a new home four years ago and sold it this year at a loss of around $35,000. My taxman said we can't deduct this. Is he correct?

Unfortunately for you, the tax law bars you from claiming a tax loss when you sell a principal residence. Since the home was not held for business or investment purposes, but only for personal purposes, no loss is allowed.

On the flip side, if you had taken a profit, you could have excluded gain up to $500,000 (you would have been taxed only at gain in excess of $500,000). Hopefully, the real estate market will turn around so that homeowners will only have gains (and not losses) to worry about!