You will pay no capital gains tax when you sell your family home as long as it has been used for the entire period of ownership, as your principle private residence.
But what to do if you either have, or are considering the purchase of, a second home?
Capital Gains Tax (CGT) is chargeable on gains arising on the disposal of assets, other than that part of a gain which arose in the period prior to 6 April 1974. Any form of property (other than Irish currency) including an interest in property (as, for example, a lease) is an asset for CGT purposes.
Tax Tips for Landlords!
If you rent out property you will pay income tax on the difference between the rents you have charged in a tax year, less any allowable expenses and charges.Allowable expenses include:
Repairs – If you pay to maintain your property in its existing condition, you can claim for the expenditure incurred. However if you improve the specification of the property, say replace kitchen units with a more expensive design, then the Revenue may try and argue that the expenditure is an improvement. The cost of improving your property can be claimed against any capital gains tax when you sell, but will not be allowed as a deduction for income tax. There are currently concessions relating to insulation and also for replacing outdated items such as single glazed windows with double glazing, this being the modern equivalent.
Mortgage or loan interest – Relief is due for 75% of interest paid on loans to purchase, improve or repair a residential premises. You cannot however, claim for the capital element of the loan repayments.
Furniture replacement – If you let a property furnished the Revenue will allow you to make a deduction for the depreciation and replacement of furniture. There are two ways in which you can do this.
Wear and Tear – Depreciation of furniture and fittings
With effect from 4 December 2002 the allowance is 12.5% per year over 8 years.
For the period between 1 December 2001 and 3 December 2002 the allowance was 20% per year over 5 years. Transitional provisions apply allowing the rate of 20% per year over 5 years if the item was acquired under a written contract before 4 December 2002 and the expenditure was incurred before 31 January 2003.
Prior to 1 January 2001 the allowance was 15% per year for the first 6 years and 10% and taxpayers. We are trained to advise our clients regarding all aspects of property tax in order to help landing the 7th year.
How we can help?
Financial Management Consultant are the accountants who focus on small businesses and medium size business.
If you would like to discuss any of the issues raised, please call us on 018486816 or complete our enquiry form and we will call you back.