How can I write off negative equity against another gain?

[Roaster]

Hi,

I read on a tax related website that its possible to write off a capital loss against a capital gain in the same year or in subsequent years.

So, I'm wondering how this would apply if I'm "trading down" from my current house to a cheaper property. In other words, if I sell my current home/PPR (House 1) and incur a loss on the original sale price of €30K, and buy another house (House 2) which becomes my PPR, can I write off the 30K loss if I sell house 2 at a profit at a later date? If so, within what timeframe would I need to sell house 2 to be able to do the write-off?

Would appreciate advice from you tax experts out there?

Thanks
Roaster

 

[Mucker Man]

As far as I know if the house is your PPR, there is no tax liability if you make a gain on the sale.

 

[Roaster]

Thanks Mucker Man....so does that mean that if House 2 was not my PPR (e.g. if I rent it out for a while), and then sell it for a profit, I would be able to write off the loss on sale of House 1?

 

[jpd]

In fact, the gain on the sale of all property is liable to CGT but you get full relief for the gain on your PPR, so CGT is never levied on any gain from the disposal of your PPR.

As a consequence of this, a loss on the disposal of your PPR is not allowable against other gains - in the current or future year.

If the property was your PPR for only part of the period of ownership, then the relief is scaled back in proportion to the periods of PPR and non-PPR, so in theory part of the loss could be used .

 

[jambo]

Thanks Mucker Man....so does that mean that if House 2 was not my PPR (e.g. if I rent it out for a while), and then sell it for a profit, I would be able to write off the loss on sale of House 1?

You're trying to create a tax liability so that you can get out of same tax liability. I think you're misunderstanding what the write-off is, it's not money into your hand. If you have no tax liability then you have nothing to write-off against. Creating a tax liability for yourself even if possible wouldn't gain you anything other than a psychological boost that some good has come from your loss.

 

[ipad]

If the property was your PPR for only part of the period of ownership, then the relief is scaled back in proportion to the periods of PPR and non-PPR, so in theory part of the loss could be used .

This is interesting as I think lots of people will need to rent in order to trade up and rent out their pprs most of which would be in neg equity. If they were then in a position to sell in say 5 years time then does this mean that the years of non-occupancy could be used to calculate a capital loss? What's the time frame for carrying forward such a capital loss?

 

[jpd]

Capital losses can be carried forward indefinitely.

Of course, they may find that although they have then generated usable losses to carry forward, they need to generate gains at some time in the future, in order to profit from them.