CGT - Do you deduct the mortgage amount owed?

J

Julia111

Registered User
Messages
16
Good Evening

I haven't been able to find the answer to this anywhere else so i am hoping you can help? We have a second property and are considering renting it out as it is in negative equity. If we later decide to sell it, do we deduct the mortgage amount owed from the gain? ie there will not be a gain once we deduct what we owe the bank.

Thanks
 
Capital Gains Tax is a tax on gains.

It's the sales prices less selling expenses less the purchase price plus purchase costs.

The period it was your PPR is exempt.

The mortgage is irrelevant!
 
we have a dependent relative who lives there and will move out to a nursing home soon. they have not been paying any rent. so if we rent it out to tenants for say 2 years after she moves out, how do we calculate what we owe? thanks
 
So am I thinking along the right lines here? Would appreciate your help...

Sell house for 120,000
Value of property in 1986 - 25k
adjusted for inflation 25 x 1.713 = 42,825(this is from the Table of inflation from revenue - but it ends in 2004, do I use this??)
120,000 - 7000 selling expenses = 113,000
113,000 - 30,000 home enhancements = 83,000
83,000 - 42825 = 40,175 chargeable gain
tax due = 13,257.75

But then I have the piece about it being lived in for 30 years up till this year so how do I adjust the above calculation if we decide to rent it for 3 years now...?
 
Thanks for you replies! Property was occupied by my husband and then my mother-in-law (rent free) for the entire 30 year period so I do believe we would be exempt from CGT if we sold it within the next 12 months. But we need to decide whether to rent it out for a while instead (as it is in negative equity) and that is where I am struggling to see how the CGT is calculated. Say we occupied/dependent relative lived in it for 30 years (360 months) and rented it for 3 years (36 months), total ownership 33 years (396 months).

Does it work like this (following from the above calculations)?

capital gain = 40,175
period of ownership: 33 years (396 months)
period of occupation: 30 years (360 months)

40,175 x 360 = 36,522.72
-----
396

chargable gain 36,522.72
tax due 12,052
 
The last 12 months should also qualify for the relief even if you did not live in it. So 372 months of the 396 would qualify for the relief.

The taxable portion in your example would be 40,175 * 24/396 = 2,434 giving a tax liability of €803.
 
just this question left then.... the Table of inflation from revenue ends in 2004, do I use this??)
 
Yes you can use the inflation rate. It still applies for any asset purchased before 2002. The enhancement expenditure can also qualify for this relief if incurred before 31st December 2002.
 
thanks again srase, so just out of curiosity, do you know why table of inflation does not go up to 2015/16, I mean should the multiplier not be higher by now as 2004 is 12 years ago?
 
The rates have remained unchanged since 2004 so this is the most up to date table and it is these rates you use. There is no relief for inflation from 2004 onwards but you can still claim the relief for costs incurred before this date per the rates set out in the 2004 table.
 
You use the inflation adjustment for the year you purchased. Also use it for the year of your enhancements.

Watch out for Euro/pound.
 
Last edited:
€7K for a sale at €120K seems very high. €2500 would be even at the higher end of the scale. You should be able to negotiate a far better rate than €7K. If house is 'sellable' then 1% should be your starting point

As previous poster has mentioned, how are you in negative equity if you bought at €25K and sell at €120K?
 
You must log in or register to reply here.
Back
Top