Should we have some CGT on the family home?

But did they make the lot of money from buying and selling? They made the money from owning property.

One big drawback of the proposal is that it might discourage people from trading up or down. And in a healthy market, people should trade up and down.

Brendan
The other drawback is the position of a family who have moved in with a parent. When the parent dies they may well have to sell up. That could be avoided if the same rules that are currently in place for inheritance are applied.
 
In the US, if you realise a capital gain on the sale of your main home, you can only exclude $250,000 of that gain (or $500,000 if married and filing jointly) for tax purposes. This exemption is only available once every two years.

Very interesting.

Not sure about the two years limit. Very few people would trade up again within 2 years. And if they did, they probably wouldn't have much of a gain.

And sometimes people have to trade up again quickly. They have bad neighbours. They can't afford their mortgage. They move job.

But I like the principle of a limit of some sort.

Brendan
 
When the parent dies they may well have to sell up. That could be avoided if the same rules that are currently in place for inheritance are applied.

Well they would be subject to CGT on the gain between when the parent bought the house and when they died.

So if they got a €500k house, which was bought for €200k, they would be paying €100k CGT.

I would be happy to inherit a €500k house if I had to pay €100k CGT.

And mechanisms could be put in place to defer the payment or to get a mortgage for it.

Most people can't afford to buy a house at all.

Brendan
 
Are you fully opposed to CGT on the PPR? On all PPRs? Even homes worth over €2m?
In my anecdotal experience people rarely crystallise these gains, staying in overly large properties until death.

My grandmother is sitting on a 10000% nominal gain in her PPR which she will never exercise!

I'm in favour of a higher LPT overall, and a lower CAT threshold overall for inheritances. I think that's fairer and introduces less incentives to sell or not sell at certain times that CGT does.
 
I am thinking about the millenial generation, people under 40.
In general these people cant get on the property ladder.
We all know the reasons why.
Your proposal would really screw a lot of people.
The goal should be to enable people to buy and own their own property.
If parental help is needed via inheritance or gift, that is their business.
I am seeing RED here, and I dont think Ireland needs any more socialism.
 
I am thinking about the millenial generation, people under 40.
In general these people cant get on the property ladder.
We all know the reasons why.

Hi fisto

My intention is to help these people get on the housing ladder!

5) Would there be some way of ringfencing the tax generated by this measure to help younger people get on the housing ladder? For example, abolish VAT on starter homes bought by FTBs? And fund this through the CGT measures.
 
But did they make the lot of money from buying and selling? They made the money from owning property.

One big drawback of the proposal is that it might discourage people from trading up or down. And in a healthy market, people should trade up and down.

Brendan
In every instance the property increased very substantially in value. To me, they made the money by buying and selling, and one could say, by also owning the property.
 
Hi fisto

My intention is to help these people get on the housing ladder!
Just talking about CGT on disposal at death....why is charity not allowed start at home, and the person leaving the house decide fully on the distribution of funds to the next generation?
We are going too far with removing personal decision making if this were to change.
 
Just talking about CGT on disposal at death....why is charity not allowed start at home, and the person leaving the house decide fully on the distribution of funds to the next generation?
We are going too far with removing personal decision making if this were to change.
Good point, also a very important one.
 
Hi PMU

I am proposing to tax the gains from selling a house. I would like to see people paying tax on their gains rather than as at the moment, ordinary people paying Local Property Tax on on ongoing basis.

Brendan
I understand that, but domestic property is unique. Purchasing a domestic property entails the purchase of (a) a service, i.e. the provision of shelter and (b) a fixed asset i.e. the walls, roof, foundations, etc. In practical terms these are indivisible. You can’t efficiently separate out the what the family has paid for its family-specific shelter needs from any increase in value of the fixed asset component.

And consumers understand this. Families buy domestic property primarily to meet their shelter needs and associated family-specific intangibles (i.e. is the property close to work, schools, other family members, etc.). Asset appreciation is not the primary consideration on purchase, if at all. (Without wishing to go off topic, when purchasers add asset appreciation potential above their shelter needs, they may, i.e. almost certainly will, overpay for a property. And they are buying on margin. So when property prices or interest rates fluctuate, which they do, such purchasers may well be in negative equity / can't continue their mortgage payments / attempt strategic default, etc. Of course, in this country, such purchasers don't lose their property. They are bailed-out.).

As properties tend to increase in value in tandem, you’ve no real gain when you sell when your shelter needs change as any gain will be swallowed up due to property price inflation. It’s unreasonable to tax such interim gains.
 
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As properties tend to increase in value in tandem, you’ve no real gain when you sell when your shelter needs change as any gain will be swallowed up due to property price inflation. It’s unreasonable to tax such interim gains.

That is easily dealt with by having roll-over relief. The CGT is refundable if the person buys another house. So, for most people, the CGT liability will hit on death.

Brendan
 
That is easily dealt with by having roll-over relief. The CGT is refundable if the person buys another house. So, for most people, the CGT liability will hit on death.

Brendan
Hi Brendan

How you do propose quantifying historic enhancement expenditure in relation to a PPR CGT case post-death? And also for self-builds?
 
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How would I deal with property valuation for Local Property Tax? Self-assessment which is not perfect, but works generally.

One of the arguments against charging CGT on shares on death is that it would be difficult to establish the base cost. That should not stop an otherwise good policy.

Likewise, if I had to work out the base cost for someone dying today who bought their house 20 years ago, I could do a good stab at it. If they added a kitchen 10 years ago, it's probably not reflected in the value today.

Brendan
 
Hi Brendan

How you do propose quantifying historic enhancement expenditure in relation to a PPR CGT case post-death? And also for self-builds?

Not an issue going forward. Can be reported in real time (say within 2 years of completion) and invoice can be uploaded to revenue directly for automatic calculation when the time comes.
 
With people living longer, from a societal point of view, it seems like an ineffective way for capital to be recycled in that people in their 50's, 60's and 70's receive large windfalls when they are established and preparing for retirement themselves. The money will just be re-invested or kept in cash or whatever.

It would seem far more beneficial if the wealth was distributed when their children are proposing to get on the housing ladder themselves or taxed as is proposed in the thread.
 
How would I deal with property valuation for Local Property Tax? Self-assessment which is not perfect, but works generally.

One of the arguments against charging CGT on shares on death is that it would be difficult to establish the base cost. That should not stop an otherwise good policy.

Likewise, if I had to work out the base cost for someone dying today who bought their house 20 years ago, I could do a good stab at it.
And if they bought it 30, 40 or 50 years ago, Brendan? Comparatively few people die within 20 years of buying their home.

Your analogy of valuations for LPT purposes is inappropriate. For starters, Revenue provide indicative LPT valuation estimates, which the owner can either use or discard. In most cases, the amounts at issue will only be a few hundred euro either way.

In the case of CGT, the owner is dead and was not within their lifetime mandated or even recommended to keep a permanent record of home improvements, conversions, extensions etc. So nobody surviving them is after their death going to have the first clue of what enhancement expenditure was made on the place during the period of ownership.

Unlike as with LPT, if anything is missed, the consequences in relation to tax overcharge could be significant. For example, a £10,000 improvement in the mid 1970s would with pre-2004 indexation and euro conversion translate into a deduction for CGT purposes of approx €100,000.

But if nobody, including the Revenue Commissioners, knows or could reasonably know whether or not such expenditure was made almost 50 years ago, how could a valid CGT assessment be raised on such a flimsy basis? And how would executors be expected to manage a risk of that magnitude?

The whole effort would most likely end in a Kafkaesque fiasco with significant reputational risk for both the Revenue and the government.

For that reason it'll never see the light of day.
If they added a kitchen 10 years ago, it's probably not reflected in the value today.
They'd still be entitled to enhancement expenditure relief even if the added kitchen had been demolished in the meantime.
 
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Not an issue going forward. Can be reported in real time (say within 2 years of completion) and invoice can be uploaded to revenue directly for automatic calculation when the time comes.
It would be a huge issue for the next 50 to 60 years. There are young people currently not long settled down in their new homes who will die in old age while still living there.

And the idea that a compulsory reporting system (as if it would ever work, it frankly sounds like something the CCP would dream up) could in half a century's time be reliably relied upon to guide the CGT treatment of those homes at that point is fanciful to put it mildly. When data is held that long, the risks of its corruption, misinterpretation or eventual redundancy is strong.
 
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That is easily dealt with by having roll-over relief. The CGT is refundable if the person buys another house.

Brendan
If you are offering 100% enduring roll-over relief you might as well not charge CGT at all, as all you are doing is introducing additional bureaucratic friction in housing transactions. It’s also unreasonable to refund CGT where a person buys another family home but to charge it without refund where someone of necessity cannot buy another property because they must enter a care home or otherwise rent sheltered accommodation.

It also would contribute to slowing down of property transactions. Why sell and incur CGT, when you can just continue to live in your family home and leave it as a bequest? The beneficiaries may have to pay CAT, where the property is valued above the relevant CAT group threshold. If it isn’t they have no tax liability. So if the owner sells they pay CGT, but a beneficiary may not have any tax liability.
So, for most people, the CGT liability will hit on death.

Brendan
But there is no CGT liability on shares transferred on death. Why introduce one on property?
Hi PMU

I am proposing to tax the gains from selling a house. I would like to see people paying tax on their gains rather than as at the moment, ordinary people paying Local Property Tax on on ongoing basis.

Brendan
The solution here lies more in introducing spending limits on local authorities; the elimination of vanity projects; strict control of project costs, etc.
 
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