CGT query on rental property

P

Phoebe2000

Registered User
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Hi all,
I bought a house in 1998 for €99,000 (£78,000). It was my PPR for 10 years and in 2008 I remortgaged (still in negative equity but only just) and rented it out.
It is worth approx €240,000 now. I have a couple of questions in relation to the CGT I will need to pay on disposal:
  • While it was my PPR, I spent approx 10K on a new kitchen and bathrooms. Can this be used as an "enhancement expenditure" deduction in calculating my capital gain or does this expenditure need to have been during the rental period?
  • I will need to put some money into it in order to sell it - new floors, painting etc. Can I also deduct these costs from the CGT?
Thanks for any advice!
 
Yes, all of that expenditure feeds into the formula, but it is adjusted to account for the period that the property was your PPR.

Let's assume you owned it for 20 years (1998 to 2018).

For 10 years, it was your PPR, and there's always an additional deemed 12 months, so 11 years of total PPR relief.

- You bought it in 1998 and presumably incurred costs in relation to the transaction (e.g. fees, legals, stamp duty perhaps, etc). These would be allowable, as would your disposal costs.

- The above qualifies for indexation (see Revenue.ie for the relevant multiplier). If the kitchen or bathroom were done pre-2003, they might too.

- Broadly, 11/20 of the gain (55%) will be exempt and 9/20 of the costs (45%) will be alllowable. This will be dealt with in the calculation.

Gordon
 
Hi Gordon,

Thanks for your reply. I replaced the kitchen and bathrooms while I was living there - around 2005/2006 so after allowable indexation.
Let's assume my legal cost etc. on purchase were 3k.
So in working out my starting position :
99 + 3 = 102 by 1.232 indexation (bought 1998) = 124k
Can I add the 10k for the kitchen and bathrooms to this giving me = 134??

Then also add my disposal costs (legal costs) let's assume another 3k.= 137k.
Assuming I need to put in 5k to sell it - painting, flooring, carpets etc = 137 + 5 = 142
My capital gain then becomes 240 - 142 = 98k

Adjusted for time as PPR v rental property = 98 * 9/20 = 44,100
Subtract personal credits as a married couple (1270 each) = 44,100 - 2,540 = 41,560
Capital gain = 41,560 * 33% = 13,715

Is this correct?

Also why is there an additional deemed 12 months on top of the 10 years as my PPR?

Thanks again for your help with this!
 
The extra 12 months is provided for in the legislation to allow time to sell one's home.

The painting/flooring/carpets wouldn't be allowable for CGT purposes.

Other than that, you're not a million miles off. When doing the calculation, you adjust each enhancement expense to account for the disallowed PPR period (because PPR relief eliminates a gain but also disallows an expense).
 
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