There are certain fees associated with selling a house and one of them is tax. Even before you put your house in the market, it is important to have an idea if you need to pay tax or not. If you do, you must find out how much you’d be paying. Doing these allows you to be financially prepared and lets you ensure that you don’t end up empty-handed after paying your dues.
So, do you need to pay tax when you sell your house in Ireland? This depends on the kind of property you are selling.
When you sell a house which is your primary or only residence, you are exempted from paying Capital Gains Tax (CGT). This is mainly because of the Principal Private Residence (PPR) Exemption or Relief. The PPR Exemption also applies to an acre of land around your property. Anything beyond the one acre is already taxable, though.
It is important to note, however, that the PPR Relief has restrictions. For one, the exemption won’t fully apply to your house if only a part of it served as your home. For example, if you rented out a room or a part of the house, you need to pay CGT on these parts.
Your PPR Relief may also be restricted when you sell your house for its developmental value. Here, the relief only applies to the property’s value sans the developmental value. Any amount beyond this is subjected to CGT.
What if you have not lived in the house for quite some time? Often, entirely avoiding CGT liability may not be possible in these situations. This is because part of the gain on sale is subjected to tax if you did not live in the property for the entire period of ownership.
There are exceptions to the abovementioned rule, though. For example, the occupancy of the house for the past 12 months won’t be questioned as the property is automatically regarded as occupied by you. This exemption was put in place to avoid complications for homeowners who moved out of their house before the sale was finalised. Hence, your claim to PPR Relief should not be affected.
Similarly, if you have not been living in the house because of work – say your employer required you to relocate, then you should not worry about paying CGT. However, the house still needs to be your primary private residence before and after your absence. Simply put, you need to occupy the house before putting it on the market to claim the PPR Relief. It is not clear though how long you have to reoccupy the house before selling it.
Meanwhile, when you sell your house which is an investment and not a primary private residence, you need to pay capital gains tax.
Indeed, fully grasping taxation laws observed when selling a house can be a bit challenging. But do not worry because you don’t have to do this on your own. You can consult your real estate agent and more importantly, your solicitor about these matters.
It is your solicitor’s job to take care of all things involving taxes. He is responsible for determining if you can claim PPR relief and if you have to pay CGT or not. He is also the one who informs you about how much you have to pay.
Selling a house is not easy given the various laws you need to observe. This is why it is important that you have the right people – real estate agent and solicitor – around you when you embark on this endeavour.
Selling your house in Ireland? Need more information on taxes and other expenses related to selling a house? Call us now at 014959020!
—Image by Alexander Stein from Pixabay