Capital Gains Tax Question

bigbadcon

Hi all,

Im hoping someone can help me understand Capital gains tax a bit better if thats ok as the documents revenue publish are so hard to understand.

The family and I are moving to Australia in Feb 2013 and are going to rent out our house in dublin while we are gone.

We built the house on the land next to her dads house 5 years ago and got a mortgage of €269000 at the time (of which 65k was work to her dads house)

The mortgage is currently at around €235000 but my plan is to start paying it off as soon as I can.

I would say the house is worth around €190000 at the moment so Im wondering the following relating to CGT if we decide to sell the house.

1. Im assuming CGT is on the Gain youve made on the house and not on the sale price?

2. If the house is sold less than you paid for it are you liable to CGT?

2. Assuming the answer is Yes to #2... If we only rent the house out for say 2 years before we sell it are we liable to pay the full 30% CGT or is it considered that we only rented it out for 2 out of the 7 years we owned it so we pay a portion of the 30%

Thanks in advance folks..

aujopimur

As tar as I know CGT does'nt apply to the sale of your home.

StillWaters

CGT only applies if a profit was made, ie sale price more than purchase price.

athtrasna

aujopimur wrote: »

As tar as I know CGT does'nt apply to the sale of your home.

It does if the property has been rented out! OP you are correct, you will pay a proportion of the gain based on the percentage of time it was rented v owned.

bigbadcon

StillWaters wrote: »

CGT only applies if a profit was made, ie sale price more than purchase price.

Would it not apply because we were renting or is it only applicable if you were renting and made a profit when selling.

Thanks for the replies folks by the way...

mrs vimes

bigbadcon wrote: »

Would it not apply because we were renting or is it only applicable if you were renting and made a profit when selling.

Thanks for the replies folks by the way...

CGT is generally levied on the sale of a house if it has increased in value during the period of ownership. There is an exemption where it was the owner's principal private residence throughout the period of ownership.

There is also an exemption where a person has been working in another part of the country (for up to 4 years) or abroad (no time limit) provided the person lived in the property before and after the period they were away. In your case, assuming you return from Australia in a few years, move back into the house and then sell it, you would be exempt from CGT on disposal.

If the house has not increased in value there is no CGT anyway.

Obviously, these rules could change in future budgets.

bigbadcon

It seems CGT won't really affect me at all considering the drop in house prices as the house was valued at 330000 when we built it and its worth 190000 in todays market.

Thank for clearing it up folks.

Appreciate it ...

wexford12

You may want to check with an accountant because you are leaving the country your tax on the rental will be a lot higher than if your living in Ireland. The same may apply if you were to sell it if its your family home = no tax to pay, if its a investment CGT won't come into play as your not making a profit on the sale ie. a gain. But But But there may be a catch if your no longer living in this little country of ours.

RATM

wexford12 wrote: »

You may want to check with an accountant because you are leaving the country your tax on the rental will be a lot higher than if your living in Ireland. The same may apply if you were to sell it if its your family home = no tax to pay, if its a investment CGT won't come into play as your not making a profit on the sale ie. a gain. But But But there may be a catch if your no longer living in this little country of ours.

Agreed. Tenants of landlords who are non-resident are supposed to deduct 20% of the rent and send it direct to Revenue. If they don't do this then there is a possibility that Revenue can hold the tenant personally liable for the 20% further down the line which could equate to a tax bill for thousands.

bigbadcon

wexford12 wrote: »

You may want to check with an accountant because you are leaving the country your tax on the rental will be a lot higher than if your living in Ireland. The same may apply if you were to sell it if its your family home = no tax to pay, if its a investment CGT won't come into play as your not making a profit on the sale ie. a gain. But But But there may be a catch if your no longer living in this little country of ours.

Why would the tax be a lot higher if Im not living in the country? Isnt it 20%...

We are going to use a letting agent as the management company which will mean the tenant wont have to hold back any tax and submit it.

wexford12

bigbadcon wrote: »

wexford12 wrote: »

You may want to check with an accountant because you are leaving the country your tax on the rental will be a lot higher than if your living in Ireland. The same may apply if you were to sell it if its your family home = no tax to pay, if its a investment CGT won't come into play as your not making a profit on the sale ie. a gain. But But But there may be a catch if your no longer living in this little country of ours.

Why would the tax be a lot higher if Im not living in the country? Isnt it 20%...

We are going to use a letting agent as the management company which will mean the tenant wont have to hold back any tax and submit it.

I would guess its a lot higher because they would say the money is going out of this country. I don't know but wouldn't of thought it was up to the tenant to sort out the extra tax. My advice would be to talk to an accountant