CGT on house rented for 3 yrs

M

mloc

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HELP!!! My wife and I bought a house in 1997 and lived in it as our principle private residence until 2004 when we moved. We then rented the house from May 2004 to May 2007 (3 yrs). The house is now sold. The original value back in 1997 was €110k. The value in 2004 when we started renting it was €500k. The value when we sold it in 2007 was €610k.

Can anybody let me know what CGT we are liable for and how can we reduce it?

Also, how does revenue establish the values of the house in 1997, 2004 and 2007. Do they get them from me or can they get them independently of me?.
 
OK - let's say that you lived in it for 6 years and rented it out for 3 before selling it. In this case (3-1)/(6+3) = 2/9ths or 22% of any capital gain arising from its sale is assessable for CGT. (I'm just dealing with round years here but a more accurate result will be achieved using months, weeks days etc. as appropriate). When calculating your CGT liability you can offset certain allowable expenses, use your annual CGT allowance of €1,270 (x 2 in your case if the property is in joint names), index the original purchase price for inflation up to 2003 (?), offset any previously incurred capital losses (e.g. eircom if applicable?) etc. It's all summarised here:

[broken link removed]

but if in doubt you should get professional advice with your CGT liabilities and return. CGT is a self assessed tax and the onus is on the individual to file returns honestly or face the consequences if they do not and are found out. Note that only the market value at 1997 (what you paid for it) and 2007 (what you sold it for) are relevant. The intermediate market value at 2004 is irrelevant.
 
Am I right in thinking that going by those calulations we could have a CGT liability of around 90k????
I'm taking the difference between the sales price and purchase price to be 500k and multiplying it by (3-1)/11 (3=rent period, 11 = total period of ownership).

Please tell me I'm going wrong somewhere??
 
Sorry - I got the calculations a bit muddled above!

Anyway - if the original purchase price was the IR£ equivalent of €110K then the acquisition price adjusted for inflation is:

€110K x 1.251 (if purchased before end of April 1997) = €137,610
€110K x 1.232 (if purchased after end of April 1997) = €135,520

Let's take the latter figure for now. This means that your gross capital gain is:

€500,000 - €135,520 = €364,480

If you owned the property for 11 years, 3 of which were rented and the other 8 lived in as your PPR then you are correct to say that

3-1/11 = 2/11 = c. 18% of any capital gain is assessable for CGT.

So €364,480 x 18% = €65,606 of your gain is assessable for CGT at 20%

From this €65K you can deduct allowable expenses before calculating your CGT. Let's assume that you had allowable expenses (e.g. acquisition, disposale expenses etc.) of €5K and and 2 x €1,270 annual CGT allowances totalling €7,540 then your CGT liability would be:

€65,606 - €7,540 @ 20% = €58,066 @ 20% = c. €12K

Once again these figures are just rough and I could have made mistakes but should illustrate how your ultimate CGT liability is reached. You definitely should get professional advice but I hope this helps to explain matters somewhat?
 
Sale price was 610K So 610K - 135.5K - Say 10K costs minus 2.5 allowances x 18% * 20% = €16,630ROUGHLY!!!
 
All I can say is PHEWWWWWWWWWWWWWWWWWWWWWWWWWW!!

I can live with 12k to 16k but 90k would have had me swimming to Spain!! ( with my wife on my back!! )

Brilliant help lads and very much appreciated.

If we carried out refurb work during the period of ownership can we offset this too?
 
ssap16 said:
Sale price was 610K So 610K - 135.5K - Say 10K costs minus 2.5 allowances x 18% * 20% = €16,630ROUGHLY!!!
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Yes - again I misread and thought that the sale price was €500K! But plug the correct figures in (as you have done) and you get something approaching the correct answer which is much less than the original poster's €90K odd. Apologies for any confusion caused by my inaccurate sums!
 
This means that your gross capital gain is:

€500,000 - €135,520 = €364,480
Click to expand...

Should this not be 610,000 - 135520 = 474,480

So CGT laibility is calc as 474,480 *18% = 85,406 - Expenses 7,540 = 77,866 @ 20% = 15,573

Also afaiw acquisitions figures can also be index linked.
 
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I just rang Revenue to clarify the exemption around refurb costs and the guy told me that you are only allowed a total exemption of €2,150 on all refurb work carried out while we owned the house!!! I asked him if we carried out say €30k worth of work on the house are we still only to get an exemption of €2,150 and he said yes!!
Does that make sense? He didn't seem to be sure of himself (I think he was reading from a leaflet) .

Can anyone give me a bit more detail around this exemption? When we owned the house we did a major refurb on it about 3 yrs before renting it. Rewiring, plumbing, plastering, new floors, new kitchen etc. We also put in new carpets, painted house etc during the period it was rented. Can I subtract all of these costs before I calculate my CGT liability?
 
Fixed items that are reflected in the current value of the house should be allowed - so in this case it'd be the rewiring, plumbing, plastering, new floors and new kitchen (but not the applicances).

Paint and carpets would be part of the normal expenditure on a house and not deductible for CGT purposes.
 
asdfg said:
Should this not be 610,000 - 135520 = 474,480
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Yes - my mistake as I mentioned here:
ClubMan said:
Yes - again I misread and thought that the sale price was €500K!
Click to expand...

asdfg said:
Also afaiw acquisitions figures can also be index linked.
Click to expand...
Yes - as I mentioned...
 
You really need to get professional advice and not depend on either Revenue or online bulletin boards other than for general guidance. Both can and do make mistakes. In particular if you act on incomplete or incorrect info given out by Revenue they will not accept this as a valid excuse for making an icorrect return. The onus is on you to make a correct return and chances are you need professional advice to do this.
 
One thing that i didn't see mentioned here

The last year of ownership is regarded as a year of "deemed residence" for CGT purposes.

If the reasons for moving out in 2004 are work related,then there may be further relief depending on the circumstances.
 
ClubMan said:
From this €65K you can deduct allowable expenses before calculating your CGT. Let's assume that you had allowable expenses (e.g. acquisition, disposale expenses etc.) of €5K and and 2 x €1,270 annual CGT allowances
Click to expand...

Why are there annual CGT allowances of 2X €1,270?
Is it because the house is being sold by mioc and his wife so the €1,270 applies to each of them?
The reason I am asking is that my wife and I sold a house which we rented out for the past few years a couple of months back and I am trying to calculate the CGT. I have read the revenue booklet on CGT thats on the web but it doesn't seem to give any clarification on this - just says that the personal exemption applies to individuals only. We had no other Capital Gains (nor will we) this year
 
FredBloggs said:
Why are there annual CGT allowances of 2X €1,270?
Is it because the house is being sold by mioc and his wife so the €1,270 applies to each of them?
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I am assuming that the property is owned by both of them and so each of their individual CGT allowances can be used. Note that in the past such allowances were transferrable between spouses even if assets were in only one of their names but that is not longer the case.
You should get professional advice but if you both owned the property then I presume that you can each use your allowances. In fact it may be more a case of doing two individual CGT returns for 50% of the capital gain each since I don't think that married couples are ever jointly assessed for CGT.
 
I did say my post crossed with your explanation See here
Last edited by asdfg : 11-09-2007 at 04:03 PM. Reason: Post crossed with SSAP 16 & Clubman's - Trying to get info correct
Click to expand...
Also afaiw acquisitions figures can also be index linked.
Click to expand...
Sorry, I meant to say acquisition costs i.e solicitor etc
 
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