Personal vs Investment Asset

The distinction between personal and investment property is important in tax law. A loss on investment property can be deducted as a capital loss. A personal loss cannot. Expenses on investment property are deductible as itemized deductions subject to 2% of adjusted gross income. Expenses on personal use property such as your home, car, or furniture are not deductible. The key point to make a property investment property is whether the property was held for the production of income which is a facts and circumstances test. For example, a house purchased for your child to live in while in college is personal use property. However, if the same house is later rented to other students, then it is investment or rental property.