Selling house, are you ever eligible to pay Capital Gains?
- Thread starter RMCF
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4th estate
Registered User
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Yes, it's true.
But not on all the profit made. You only pay CGT on the proportion of the profit attributable to the time you did not occupy it.
But not on all the profit made. You only pay CGT on the proportion of the profit attributable to the time you did not occupy it.
Thanks for the reply.
But how is that calculated? It sounds awfully complicated.
Can you give an example? Say I rent it for €500 per month for 2yrs, then sell for €150,000. Can the maths be done on that, or would only Revenueknow the answer?
I think this is important now to me, as I would rather sell right now instead of wasting time renting if I thought that the Gov were going to take even more tax off me, as I now have to pay SD on my new house as well.
But how is that calculated? It sounds awfully complicated.
Can you give an example? Say I rent it for €500 per month for 2yrs, then sell for €150,000. Can the maths be done on that, or would only Revenueknow the answer?
I think this is important now to me, as I would rather sell right now instead of wasting time renting if I thought that the Gov were going to take even more tax off me, as I now have to pay SD on my new house as well.
J
JoeB
Guest
I think the point is this.
You purchase a house in 2000 for 200,000, and live in it as a PPR.
In 2007 the house is worth 300,000
You rent it out from 2007 to 2009 and sell in 2009.. the house is worth 320,000 when selling , so the capital gain would be 20,000, from the period of 2007 to 2009.. this is the amount you pay tax on.
Of course in the real world it could be that you actually sell the house in 2009 for 250,000.... so then there'd be a capital loss of 50,000, I'm not sure if this 'loss' can be offset against other capital gains, on other types of capital gains, like shares or gold for example.
I'm not an accountant so this could all be wrong... (but I think it's correct to say that you pay no tax on the capital gains made while you were living there, so the increase from 200,000 to 300,000 is tax free in the first example above.)
edited to add... of course in this country there's no easy way to determine what the house was worth in 2007 say, at the time of changeover from PPR status, to investment property status.. I'm not sure how this is worked out by Revenue, maybe it's self assessed.
You purchase a house in 2000 for 200,000, and live in it as a PPR.
In 2007 the house is worth 300,000
You rent it out from 2007 to 2009 and sell in 2009.. the house is worth 320,000 when selling , so the capital gain would be 20,000, from the period of 2007 to 2009.. this is the amount you pay tax on.
Of course in the real world it could be that you actually sell the house in 2009 for 250,000.... so then there'd be a capital loss of 50,000, I'm not sure if this 'loss' can be offset against other capital gains, on other types of capital gains, like shares or gold for example.
I'm not an accountant so this could all be wrong... (but I think it's correct to say that you pay no tax on the capital gains made while you were living there, so the increase from 200,000 to 300,000 is tax free in the first example above.)
edited to add... of course in this country there's no easy way to determine what the house was worth in 2007 say, at the time of changeover from PPR status, to investment property status.. I'm not sure how this is worked out by Revenue, maybe it's self assessed.
Thanks for that Joe, thats the type of thing I was looking for (I'll ignore the fact your post count was 666 - you don't work for Revenue do you!!).
So say my house is worth €150k now, there's a big chance it will still only be worth €150k in 2yrs time the way house prices are at present.
But I bet there is no way Revenue will say "ah sure you have made no gain, so we'll charge you nothing".
So say my house is worth €150k now, there's a big chance it will still only be worth €150k in 2yrs time the way house prices are at present.
But I bet there is no way Revenue will say "ah sure you have made no gain, so we'll charge you nothing".
4th estate
Registered User
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Here is a rough example.
You own your house for 20 years but during that time you let it out for 5 years. Therefore your occupation was for 15 years.
You sell your house and make a capital gain of 10k. You will actually pay one quarter of that figure, as you occupied the house for the other 3/4 of the twenty years.
You calculate the total gain and you get credit for the period you occupied it which in the above case is 15/20ths. i.e. 3/4
You own your house for 20 years but during that time you let it out for 5 years. Therefore your occupation was for 15 years.
You sell your house and make a capital gain of 10k. You will actually pay one quarter of that figure, as you occupied the house for the other 3/4 of the twenty years.
You calculate the total gain and you get credit for the period you occupied it which in the above case is 15/20ths. i.e. 3/4
J
JoeB
Guest
Well, 4th estates answer is different to mine... in my first example, using his methods, the gain overall would be 120,000 (from 200K to 320K), and you'd be liable for 2/9ths of that gain, as you lived there for seven years, and rented for two.
2/9ths of 120,000 would be about 240K/9 = 26,666.. this is different to the 20K calculated using my method.
I think my method is correct, but I'm not sure, could someone clarify for definite?... I'm not an accountant so if 4th estate is a professional his advice would be more authorative.
edited to add... I do feel as if my method is correct, but 4th estates solves the problem of valuation, as the valuation at time of changeover of use is irrelevant. (so 'hard' figures can be used, of actual purchase price, vs actual sale price)
But it does mean that in the example above, if you rented from 2007 to 2014, and the house was sold for 300K in 2014, that you'd be liable to CGT on half the capital gain, of 100K (half is 50K), even though none of the capital gain was made while renting... this doesn't seem right to me, but maybe it is.
2/9ths of 120,000 would be about 240K/9 = 26,666.. this is different to the 20K calculated using my method.
I think my method is correct, but I'm not sure, could someone clarify for definite?... I'm not an accountant so if 4th estate is a professional his advice would be more authorative.
edited to add... I do feel as if my method is correct, but 4th estates solves the problem of valuation, as the valuation at time of changeover of use is irrelevant. (so 'hard' figures can be used, of actual purchase price, vs actual sale price)
But it does mean that in the example above, if you rented from 2007 to 2014, and the house was sold for 300K in 2014, that you'd be liable to CGT on half the capital gain, of 100K (half is 50K), even though none of the capital gain was made while renting... this doesn't seem right to me, but maybe it is.
Almost - the last 12 months of ownership are excluded from the period of renting. In the case you've given, only 1/9 of the gain of 120,000 would be taxable - ie 120/9=13,333.
4th estate
Registered User
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- 162
Hi Joe,
The capital gain is calculated from the date of acquisition ie 2000 (in Joe's example). You are allowed to index for inflation up to the year 2002, and deduct costs such as auctioneers, Stamp Duty, Solicitors etc. in calculating the gain.
After calculating the total gain you then apply the credit for the years of ownership.
That is the way I calculated it for my sister two years ago. Revenue seem to have accepted the computation. I did contact them to get a ballpark approach though, and the above was generally it!
It is all self assessment now, so it is up to you to get it as correct as you can.
The capital gain is calculated from the date of acquisition ie 2000 (in Joe's example). You are allowed to index for inflation up to the year 2002, and deduct costs such as auctioneers, Stamp Duty, Solicitors etc. in calculating the gain.
After calculating the total gain you then apply the credit for the years of ownership.
That is the way I calculated it for my sister two years ago. Revenue seem to have accepted the computation. I did contact them to get a ballpark approach though, and the above was generally it!
It is all self assessment now, so it is up to you to get it as correct as you can.
J
JoeB
Guest
It seems to leave a loophole..
in my third example, (renting until 2014 and selling for the 2007 price)... then if you 'sold' or transferred the property to your wife for example (in 2007, before renting), then the entire capital gain is non taxable as it was a PPR... and selling in 2014 for the 2007 price, means that there'd be no capital gain at all, and no tax would be due.
Of course transferring ownership in 2007 may incur fees of some sort, so it might not work in practice,.. but perhaps this is where professional tax advice can come in handy...
in my third example, (renting until 2014 and selling for the 2007 price)... then if you 'sold' or transferred the property to your wife for example (in 2007, before renting), then the entire capital gain is non taxable as it was a PPR... and selling in 2014 for the 2007 price, means that there'd be no capital gain at all, and no tax would be due.
Of course transferring ownership in 2007 may incur fees of some sort, so it might not work in practice,.. but perhaps this is where professional tax advice can come in handy...
Sure they did as your sister overpaid. Wonder if she can go back and claim for the error, e.g. 12 months grace not taken into account in CGT calculation.
To do this you need to give 5 pieces of information
1 Purchase price of the property
2 Date purchased
3 Dates property was rented out
4 Proposed date of sale
5 Proposed sale price
1) €95,000
2) Dec 2000
3) Not rented yet, only thinking of rather than selling. Say for example Oct 2010
4) Was going to try renting for maybe 1yr or 2yrs to see whats involved in it. So for example date of sale might be Oct 2011 or 2012.
5) The way the market is, say €140,000 for example.
Thanks
1. Purchase price is multplied by the Revenue indexation factor for 2000 of 1.144 to give an amended price of € 108.680.
2. Capital gain on selling is € 140,000 less € 108,680 = € 31,320
3. Total period of ownership (in months) = Dec 2000 -> Oct 2011 = 130 months
4. Total period of use as principal private residence(PPR) Dec 2000-> Sep 2010 = 117 months
5. Total period of rent = oct 2010 - Oct 2011 = 13 months
6. exempted months = 117 + 12 = 129
7. part of gain that is exempt from CGT = 129/130
8. Taxable gain = € 31,320 * (1 - 129/130) = € 240
9. less annual CGT allowance of € 1,270
10. tax due = zero
if the house is sold in oct 2011, then the same calculation gives
3. periods of ownership = 142 months
4. period PPR =117
5. period of rent = 25 months
6. exempted months = 129 (same)
7. part exempted = 129/142
8. taxable gain = € 31.320 * ( 1 - 129/142) = € 2,867
9. less annual allowance = 2,867 -1,270 = € 1,597
10. tax due = 20% = € 319