Capital gains tax calculation on property

glut22

Posting here for traffic:

Hi there would really appreciate clarity on capital gains tax. If a house is bought (for example) at 200k and sold at 300k but the seller paid 20k in mortgage interest over the time owning it, is the profit for cgt 100k or 80k?

I.e. is mortgage interest deducted. Thanks

Peregrinus

https://www.boards.ie/discussion/2058272128/capital-gains-tax-calculation-on-property

100k. Mortgage interest is not a capital expense and is not deductible in calculating the capital gain.

Put it this way; the cost of the house was 200k. The extra 20k was not something you paid to acquire the house, which only cost 200k, but rather something you paid to borrow money. But in borrowing money you are not acquiring a capital asset; you are buying only the temporary use of the money and when the loan contract has been fully performed you end up with nothing. So the 20k is not capital expenditure and is ignored in calculating your capital gain.

glut22

Also if the house was bought in January 2017 (in the UK) and the owners moved abroad (non EU country) for work in December 2017 and it was let out up until March 2021 could the owners avail of the ppr for the max 4 years as they were required to work abroad by employer and did not own another property until Feb 2021 when another property was bought in Ireland and moved into as main residence. I.e. they never returned to the UK, and UK house sold in Jan 2022

glut22

https://www.boards.ie/discussion/comment/119884376#Comment_119884376

Thanks very much, I guess the gain is so much less when you take interest into account so that's why I thought it counts. I would really appreciate if you have any insight on my ppr question also :-)