Advertisement
If you have a new account but are having problems posting or verifying your account, please email us on hello@boards.ie for help. Thanks :)
Hello all! Please ensure that you are posting a new thread or question in the appropriate forum. The Feedback forum is overwhelmed with questions that are having to be moved elsewhere. If you need help to verify your account contact hello@boards.ie

Capital gains query on rental property with mortgage

Options
  • 05-01-2021 6:10pm
    #1
    antimatterx
    Registered Users Posts: 2,680 ✭✭✭


    Hi

    My folks are selling a property which was previously rented out. The purchase price 310K, the price at which they are selling is 380K. The bank said they would take the net proceeds after costs to allow them pay capital gains, however in the letter they sent to the solicitor, they said they want all of it.

    Any advice here? My parents don't have the money to pay 20K worth of capital gains.


Comments

  • Options
    #2
    Pawwed Rig
    Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators, Social & Fun Moderators Posts: 22,306 CMod ✭✭✭✭Pawwed Rig


    There is an important bit of information missing here. Are the bank selling the house due to non payment of mortgage? Or does the mortgage exceed the sale price?

    Why would a bank be paying capital gains tax?


  • Options
    #3
    antimatterx
    Registered Users Posts: 2,680 ✭✭✭antimatterx


    Pawwed Rig wrote: »
    There is an important bit of information missing here. Are the bank selling the house due to non payment of mortgage? Or does the mortgage exceed the sale price?

    Why would a bank be paying capital gains tax?

    It's being disposed of as my folks are looking the exit the rental business. The mortgage balance is tricky as there are two properties involved. The bank did agree initially to take the net balance (after CGT), and agreed a repayment plan for the balance.


  • Options
    #4
    Pawwed Rig
    Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators, Social & Fun Moderators Posts: 22,306 CMod ✭✭✭✭Pawwed Rig


    The CGT will be payable on the sale price less the purchase prices plus and minus costs and expenses.
    The agreement with the bank is separate to this and is not a tax question.
    They need to talk to their solicitor or hammer out an agreement with the bank.
    Is the other property being sold? Does that have losses or gains?

    Impossible to advise on tax aspects without all of the information.


  • Options
    #5
    Geuze
    Registered Users Posts: 13,108 ✭✭✭✭Geuze


    antimatterx wrote: »
    Hi

    My folks are selling a property which was previously rented out. The purchase price 310K, the price at which they are selling is 380K. The bank said they would take the net proceeds after costs to allow them pay capital gains, however in the letter they sent to the solicitor, they said they want all of it.

    Any advice here? My parents don't have the money to pay 20K worth of capital gains.

    They are making a capital gain of 70k.

    So they can afford to pay the CGT bill, if any, out of the capital gain being made.


  • Options
    #6
    antimatterx
    Registered Users Posts: 2,680 ✭✭✭antimatterx


    Geuze wrote: »
    They are making a capital gain of 70k.

    So they can afford to pay the CGT bill, if any, out of the capital gain being made.

    There's another mortgage on the property for the house they live in now. The bank want all the proceeds from the sale, so in theory there is a capital gain, my parents won't physically have any of the money.

    The only thing they will see is the mortgage balance drop.


  • Advertisement
  • Options
    #7
    Geuze
    Registered Users Posts: 13,108 ✭✭✭✭Geuze


    The mortgage must be much less than 310k, as you can't borrow more than the value of a house, so it can be repaid out of the 380k.

    Also, as I assume time has passed, and repayments have been made, the mortgage should be way less than 310k.

    Maybe go to AAM and pose your query there.


  • Options
    #8
    3283winnie
    Registered Users Posts: 82 ✭✭3283winnie


    Looking for any advice please

    So I bought my property in 2005 for 135000 and I am now selling for 205000. So I lived at this property for 3 years I then left my daughter to rent it through the Ras scheme. I took a re morgage of 50000 to do the house up so my total morgage bill now is 180000 can anyone tell me a rough idea of what I'm going to have to pay CGT. Thanks for any advice be great full


  • Options
    #9
    DmanDmythDledge
    Registered Users Posts: 883 ✭✭✭DmanDmythDledge


    3283winnie wrote: »
    Looking for any advice please

    So I bought my property in 2005 for 135000 and I am now selling for 205000. So I lived at this property for 3 years I then left my daughter to rent it through the Ras scheme. I took a re morgage of 50000 to do the house up so my total morgage bill now is 180000 can anyone tell me a rough idea of what I'm going to have to pay CGT. Thanks for any advice be great full
    205k - 135k = 70k. Can then deduct stamp duty on acquisition and costs of acquisition and disposal. You have owned the property for 16 years and lived in as PPR for 3 so whatever the gain on sale is you multiply by 12/16 to arrive at gain subject to CGT at 33%

    You will need to work out exact months of ownership and occupation so 12/16 years is a rough estimate. As it was previously your PPR it is also deemed to be your PPR for the last 12 months of ownership


  • Options
    #10
    DmanDmythDledge
    Registered Users Posts: 883 ✭✭✭DmanDmythDledge


    Also re the original post, although not sure if people still following, but it's quite possible the solicitor has/had a secondary liability to CGT so wanted to ensure it was paid in case it was not and Revenue come chasing them for it.


  • Options
    #11
    3283winnie
    Registered Users Posts: 82 ✭✭3283winnie


    DmanDmythDledge wrote: »
    205k - 135k = 70k. Can then deduct stamp duty on acquisition and costs of acquisition and disposal. You have owned the property for 16 years and lived in as PPR for 3 so whatever the gain on sale is you multiply by 12/16 to arrive at gain subject to CGT at 33%

    You will need to work out exact months of ownership and occupation so 12/16 years is a rough estimate. As it was previously your PPR it is also deemed to be your PPR for the last 12 months of ownership

    Brilliant so the sale is 205000 final figure so 70k is the capital gains. Can I ask if I am allowed to take away the money I put into getting the house up to the standard it was to sell for the price it did. Like new kitchen bathroom and full back garden concerted. Thanks for your help


  • Advertisement
  • Options
    #12
    DmanDmythDledge
    Registered Users Posts: 883 ✭✭✭DmanDmythDledge


    Well the final figure subject to CGT will be less than that :)

    It sounds like that could qualify as enhancement expenditure, i.e. It increased the value of the property. It should not have been claimed as a deduction in your income tax returns so probably can be classified as enhancement expenditure for CGT.


  • Options
    #13
    3283winnie
    Registered Users Posts: 82 ✭✭3283winnie


    DmanDmythDledge wrote: »
    Well the final figure subject to CGT will be less than that :)

    It sounds like that could qualify as enhancement expenditure, i.e. It increased the value of the property. It should not have been claimed as a deduction in your income tax returns so probably can be classified as enhancement expenditure for CGT.

    Thanks for your help I did rent the property to my daughter on the Ras scheme so some of them improvements were most likely added on my rental income returns each year will that effect me I just can't justify paying 33% of the 70000 well after soilictors fees and estate agent fees it would be a little under 60000 it's crazy money I only sold to help my daughter out in buying her own place now looks like most her money be getting paid to tax man


  • Options
    #14
    Pawwed Rig
    Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators, Social & Fun Moderators Posts: 22,306 CMod ✭✭✭✭Pawwed Rig


    33% is hardly most


Advertisement