Investment property query

B

Boston Guinness

Registered User
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Hi all

Just a quick query on how to calculate CGT on an investment property we have (and whether it makes sense to sell now).

We bought the house as our primary residence in 1999 for £125,000 (old punts); it had a large side garden and we managed to get planning to build a detached house next to it which we moved into in 2008 as our PPR. We kept our first house and it's been rented since 2008 as an investment property. We did substantial work on the investment property when doing the building work on the detached house, amounting to approximately €80k (kitchen extension/attic converted). Investment property is now worth approximately €650k.

We have a tracker mortgage on the investment property which now stands at €378k. We get €2,200/month rent and the mortgage is €3,100/month so at the moment we're paying €1,000/month to supplement the mortgage payment. We haven't increased the rent on the house for some years as I do feel we have good long term tenants and I'm okay keeping the rent at this amount. The investment property is a 4 bed property in a good area and it seems 3 bed room houses in this area are currently getting in the region of €2,400/month so our tenants are getting a good deal.

I'm wondering whether it's worthwhile however to sell now and, if so, how much would I come out with after paying the CGT on the investment property. We do have grown up kids, one is 21, one is 25 and the third one is 30. I would like to see them receive some money from us while we're still alive rather than wait for inheritance when we die, hence the query. Sorry if I've left out any details but you might let me know if anyone has any idea how to calculate the CGT on a house bought in 1999 for old punts and rented for a significant time. Thanks!

BG
 
Have you read the Revenue and Citizens Information summary guides on CGT?

Capital Gains Tax (CGT) on the sale, gift or exchange of an asset

This page explains what Capital Gains Tax (CGT) is and the CGT rate that applies
www.revenue.ie www.revenue.ie

Capital Gains Tax

Capital Gains Tax is charged on the capital gain or profit made on the disposal of an asset. Some assets are exempt from Capital Gains Tax. Find out if you are liable for Capital Gains Tax.
www.citizensinformation.ie www.citizensinformation.ie
 
€​
Proceeds of Sale
650,000​
Cost £ 125,000
Indexed up (depends on date of purchase i 1999)x 1.212 (Jan-Mar) or x 1.193 (Apr - Dec)
Let's assume June£ 149,125
189,349​
Capital Gain
460,651​
Years of ownership1999 - 2022 = 23
Years off PPR1999 - 2008 = 9 + 1 for final 12 months
​
Relief for PPR period10/23 = 43%
200,283​
Taxable gain
260,368​
Tax @ 33%
85,921​
The expenditure on the extension/upgrade may or may not be an allowable expense so I have not taken it into account
The mortgage has now effect at all on the CGT
Net proceeds650K - mortgage 378k - tax 86k
186,000​
 
Thanks, guys.

Does anyone know if the expenditure of the extension/attic conversion on the investment property is allowable or not? Considering it's approximately €80k worth of work done to the house, it may make a difference on the CGT. I assume any legal expenditure/stamp duty when buying the house could also be deducted from CGT? Sorry for all the questions but it's a little complicated for me. Just trying to give the taxman as little as possible.

There's truth in the saying, the only certainties in life are taxes and death!

Cheers!
 
Thanks everybody....the link confirms that money spent to add value to the property can be deducted. Good news there!
 
One point the 125k you paid was for house and garden, so some could be seen as development value since you built seperate house on it, so your base cost might mot be the full cost but the cost less coat of the development site- whatever that might have been at the time you developed it,
 
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