Capital Gains Tax on house

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Have asked this before but did not have specifics so posting again.

Friend bought house 30 years ago for €57,000 in Dublin when she was single.

She bought a house and farm down the country in 2007 with her fiance (they married in 2009) but she remained living in Dublin until Sept 2011 as she was working there. She just went down at weekends to other house. She claimed tax relief on the property in the country because she does not have a mortgage on the Dublin property.

She now wishes to sell the house in Dublin and wants to know what her CGT liability will be. Houses in her estate are selling for about €250,000.

Any help appreciated.
 
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As she claimed tax relief on the country house, she was, in effect, declaring it as her new Principal Private Residence. So she loses the relief on her Dublin home since then.

I think that the calculations would be roughly as follows

Sales proceeds €250,000


cost in 1982 €57,000 ( assume this was € and not £)
Index to allow for inflation: 2.253
Allowable cost: €128,000

Capital Gain €103,000

PPR relief 25/30 86%

Taxable Capital Gain: €14,420
Less annual exemption: €1,270
Approx Gain €13,000

Approx liability at 25% €3,250

If she has any unrealised losses e.g. losses on shares, she could sell these to realise the losses and set them against the gain.

If she did any extensions, she could also set these costs against the gain.

Source of figures

Brendan
 
PPR relief is 26/30, allowing for final 12 months of ownership.

For the actual return I've heard Revenue generally want calculations to the month of purchase and sale.
 
Hi. Just wondering if indexation (for inflation) is still allowed ? Did the government not do away with it ?
 
I am no expert, but I thought it was stopped for future years in 2002. But the indexation of assets acquired before then continues.

Brendan
 
Sorry about misleading you I thought she bought it that long ago but she actually bought it in 1998. Not sure how that changes the figures? the 57000 was Irish pounds not euros
 
Sales proceeds €250,000


cost in 1998 IR€57,000
= €72,380
Index to allow for inflation: 1.2
Allowable cost: €86,850

Capital Gain €163,150

PPR relief 10/14 71%

Taxable Capital Gain: €47,300
Less annual exemption: €1,270
Approx Gain €46,000

Approx liability at 25% €11, 500
 
The CGT rate changed to 30% in the last budget. Therefore, the approximate liability, based on the above calculations, would be €13,800.
 
smeharg

Thanks for that. I had that in my mind, but when I saw the 25% rate on the Tax Institute website, I thought I must have been mistaken.

brendan
 
The revenue website on Captial Gains is really easy to follow.

Don't forget the OP can also deduct her initial costs, that would be the solicitors fees, and these are also indexed. No doubt there have been 'capital' improvements to the property, I think it's called capital enhancment, these too can be deducted and indexed. And finally the sale costs, auctioneer and solicitor. Probably not much of a liability at all.
 
Thanks for this at least it gives her an idea. Any advice on whether selling or renting out is better. I can see the longer she waits to sell the more CGT she will pay.

I just wonder if renting costs a lot in terms of management fees, preparing the property, second home charge etc and would she be better freeing her capital and paying off other debts.
 
Would need all her details to advise on this. A full financial fact find would be undertaken and would also need to evaluate her attitude to risk and investment. What is a correct answer for one person may be completely wrong for an other person. She needs to speak to an Independant Financial Advisor. She should book an appointment and make it a fee based consultation (as opposed to commission based).
 
It may be more tax efficient to pay back the tax relief claimed on the country house because then there would be little or no CGT on the sale of the house in Dublin
 
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