Capital Gains Tax (CGT) - Disposal of Rental Property

egg102530

Hi folks, I am considering selling a rental property but CGT liability is a big factor in it being worth while or not.

Would really appreciate some help with the details on what is / is not deductible from my potential CGT liability. Details and specific questions below. Thanks in advance!

Property purchased Aug 2015 - rented out since with the exception of an 18 month period during which it was my principle private residence.

Specific Questions:

1. Can my wife's annual CGT exemption. (1270) be added to the total (although married she is not on the deeds to the property in question)
2. I read on revenue's site that the % of time the property was my PPR will be taken out of the CGT calculation + the last 12 months of ownership. Assuming sale in June 2024, does this mean I only incur 72% of the total CGT liability? (18 months as PPR + last 12 months ownership = 30months total out of a total ownership period of 107 months.
3. I made some capital improvements to the property when it was my PPR, e.g. new flooring and carpets, back wall, painted the outside - are these deductible?
4. Are cost of acquisition costs deductible, e.g. when I originally bought the place I paid for surveys, solicitors, valuation reports, land registry, stamp duty.
5. Are costs of sale deductible, e.g. agent fees, solicitor fees, etc
6. Any options to index link?

Thanks guys!

Geuze

1 = I think no, as she doesn't own the asset.

3 = yes, but be careful as to what is ongoing maintenance and what is capital. I am not an expert, but painting feels like ongoing maintenance?

(You would have already deducted the ongoing maintenance from your gross rental income in your tax return)

4 = yes

5 = yes

6 = no, that was abolished years ago

egg102530

Thanks! Number 2 has biggest impact on total. Any ideas on that? ;)

SureYWouldntYa

Revenue typically calculate PPR relief on a yearly basis, rather than a monthly basis. Annoyingly the tax manual dealing with PPR relief is not available at present at it's being updated.

You're probably looking at relief of 3 years out of the 10 years of ownership (assuming the 18 months was a period straddling 2 years, rather than 3 years, plus final 12 months). This would relief of 30% rather than 32% you noted, although depending on what the Revenue brief actually details there may be an argument for the monthly basis.

The gain will be reduced by the percent of PPR relief allowed, rather than the tax being reduced. E.g. gain of €100k, less PPR relief of 30% is a gain of €70k, less annual exemption of €1,270 leaves a taxable gain of €68,730 taxed at 33% is a liability of €22,681.

To add to the other points noted above, particularly point 3, if you claimed capital allowances or tax deductions on any of the enhancements against your rental income then you cannot also claim then as enhancement costs. If not claimed then they would likely be allowable as a cost of sale.