Is Equity taxed?

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Minimany

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Hi folks. I am a landlord. The following figures are approximate only. If I keep my rental property for a few more years and eventually sell it the Selling price would be approximately E230K. My remaining mortgage will be E180K, the tenants having paid my mortgage and other costs via the rent. This means that I should gain E50000 from the sale. (I think this is called equity?). Can you advise me is this E50K taxed or penalised by the government in some way? My dilemma at the moment is whether to hold on to the property to fulfil the above scenario or to sell up now at a loss.
 
Your tax liability is not related to the size of your remaining mortgage or your equity. It is based on your capital gain, i.e. how much you sell the house for versus how much you paid for it. Assuming you have never lived in the house yourself, and are not eligible for any of the CGT exemption incentives for houses bought in certain time periods, the capital gains tax rate is 33%.
 
THanks for your reply. I am aware of CGT being payable on the difference between the purchase price and the selling price. The way things are in Swords at the moment my profit would only be 5K and this would be rendered zero by legal costs etc. I just wanted to be sure that the equity that I gain by selling in a few yearsis not penalised in some way I am unaware of? Sorry if this is basic stuff!
 
No, your equity doesn't represent any kind of taxable profit or income. You could take out a second mortgage on the house and have no equity. Or you could inherit money and pay off the mortgage and have 100% equity. Your tax liability on the house would not be affected either way. It only depends on the gain you made between buying and selling.
 
Thanks for the information folks. I understand now I have already paid the tax on the equity.
 
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