# Can I claim CGT loss on sale of my home?



## What the (19 Mar 2010)

I hope to move back home pretty soon and will be selling my place in Dublin. I will loose a substantial amount of money due to the fall in the property market in the last few years. Is there anything that this loss can be offset against? If there is then is there a time limit within which you can offset the loss


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## tenchi-fan (19 Mar 2010)

*Re: Loss on Sale of Home*

Hi. A capital loss can be offset against a capital gain in future years. So you can offset your loss against future profits from property or shares.


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## Howitzer (19 Mar 2010)

*Re: Loss on Sale of Home*



tenchi-fan said:


> Hi. A capital loss can be offset against a capital gain in future years. So you can offset your loss against future profits from property or shares.


Unlikely. Given that gains from the sale of a PPR don't attract Capital Gains Tax, it's highly unlikely that any loss could be subsequently offset against a future capital gain.

PPR's fall completely outside the tax net for CGT. You can't just pick and choose the bits you like.


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## tenchi-fan (19 Mar 2010)

*Re: Loss on Sale of Home*

argh you're right. sorry misread the original post the didn't realise op was living in the house being sold


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## What the (19 Mar 2010)

*Re: Loss on Sale of Home*

I have paid 100k off the original house price but house is still in negative equity to the tune of about 30k. (Bought in Jan 07) I would probably be better off if I stay put. I would have to find the 30k plus a deposit on another house before I could buy down home. Will have to ask Brian Linehan to consider clowns like me in the next budget. 100k took a lot of saving over 5 years and to be left with nothing and no possibility of using it to reduce my tax liabilities is harsh.


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## Leaky1 (22 Mar 2010)

*Re: Loss on Sale of Home*

Actually, a loss on PPR can be offset/carry fwd against other CGT liabilities.
It would, however, need to be a monetary loss and not an indexed loss i.e. you must sell for less ?? than you bought. You arent allowed to use indexation on the purchase price (say if you bought 10yrs ago) to create the loss.

Your PPR is technically liable to CGT but the ppr relief given covers most peoples liability.


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## Brendan Burgess (22 Mar 2010)

*Re: Loss on Sale of Home*



Leaky1 said:


> Actually, a loss on PPR can be offset/carry fwd against other CGT liabilities.
> .




Hi Leaky

Can you quote an authoratitive source for this? For example, a link to a Revenue document which says this.

Brendan


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## What the (22 Mar 2010)

*Re: Loss on Sale of Home*

Hi Leaky,

Thanks for that leaky1. As Brendan says a source would help to clarify this. I have not been able to find any. It would be a monetary loss as I had planned to sell up. What investments qualify as a Capital gain? (Shares, Property, etc..) Is there a time limit before which I can claim this gain. It would take quite a while and a lot of work to generate a capital gain of 100k in todays world.


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## Leaky1 (22 Mar 2010)

*Re: Loss on Sale of Home*



Brendan said:


> Hi Leaky
> 
> Can you quote an authoratitive source for this? For example, a link to a Revenue document which says this.
> 
> Brendan



I don't have a link to a source on this unfortunately, but will have a look around for something and post back. 
I did get this answer from Revenue recently, it was explained as I posted before and clarified that up to now (typically) people have not been making monetary losses on their PPR's so this query hadn't arisen a lot.

Brendan, would this query benefit from being moved to the Taxation forum? 
Might get some positive feedback from accountants who post there.


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## Brendan Burgess (22 Mar 2010)

Hi Leaky

I don't think you are correct. 

If you live in your home as your PPR for the entire period you own it, you cannot use the loss for CGT purposes.

However, if you let the home for 50% of the time you own it, you can claim 50% of the losses. Could this be what you are thinking about?


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## jack2009 (22 Mar 2010)

I would have thought that it was not possible to used such losses on the basis that CGT on PPR is exempt/reduced.

Would OP be looking/liable to pay CGT on a gain for the same property?


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## Leaky1 (23 Mar 2010)

Brendan said:


> Hi Leaky
> 
> I don't think you are correct.
> 
> ...



Thanks for moving this to Taxation.

My reasoning for thinking the loss is allowable is as follows.

A house (either PPR or non-PPR) is a chargeable asset for CGT. A list of non-chargeable assets is available on Revenue website in their leaflet CGT1 Guide to CGT, and it does not mention a PPR as a non-chargeable asset.

CGT does in fact apply to the sale of your PPR, it's just that a measure of relief (ppr relief) is given against the tax due. The relief is apportioned to exempt the period of occupancy (plus 1-year deemed occupancy). A lot of people think their PPR is exempt from CGT but don't realise that the tax is simply reduced by the ppr relief.

The first step in calculating PPR Relief is to calculate the gain on the disposal. When the gain has been established, the next step is to calculate the period of occupancy as a percentage of the period of ownership. If you owned the property for 10years and your total occupancy is 8years then your PPR Relief is against 8/10ths of the gain.

So, if your first step in calculating PPR relief is to establish the gain then if you make a loss on the sale of the property surely you do not need to proceed any further in the calculation - you have made a loss.

The loss itself would need to be a monetary loss. If indexation is used to arrive at a 'loss' figure then this is not an allowable loss as it is a no gain/no loss situation. Simply put, I think that if you buy a house for 300,00k and sell it for 200,000k then you have made a monetary loss of 100,000k.

Sorry, this was longer than I thought. I am open to correction and would like to hear other opinions on it.


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## jack2009 (23 Mar 2010)

Leaky1 said:


> So, if your first step in calculating PPR relief is to establish the gain then if you make a loss on the sale of the property surely you do not need to proceed any further in the calculation - you have made a loss.
> 
> The loss itself would need to be a monetary loss. If indexation is used to arrive at a 'loss' figure then this is not an allowable loss as it is a no gain/no loss situation. Simply put, I think that if you buy a house for 300,00k and sell it for 200,000k then you have made a monetary loss of 100,000k.


 
Yes but to my mind if you are trying to calulate a cgt loss you would have to apply the PPR relief in a similiar manner as you would in order to calculate a CGT gain!


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## Breninio (23 Mar 2010)

S546(3) of the taxes acts states that the provisions of the Capital Gains Tax Acts that relieve chargeable gains will also apply in calculating allowable losses unless another treatment is expressly provided for. Therefore I would think that a loss on disposal of a PPR would be reduced accordingly.


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## Brendan Burgess (23 Mar 2010)

Thanks Breninio for that factual reference.

So just to make absolutely clear, you can not set a loss on your home against profits made elsewhere for CGT purposes. if the property was rented out for some of the period, you can set a portion of the loss against other Capital Gains.


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## DB74 (23 Mar 2010)

Are you obliged to claim PPR relief though?


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## Breninio (23 Mar 2010)

I can't see anywhere in S604 where it says you have to claim PPR relief. S604(3) states that "the gain shall not be chargeable if ............". As a result, my view would be that S546(3) would also apply to restrict the loss i.e. a claim is not necessary. 

I have never seen it in practice, but based on my reading of the legislation, if a loss arises on a property that was PPR for only part of the period of ownership, then a portion of that loss (calculated in accordance with normal PPR rules) would be available for offset against other gains or carry forward. I suppose this is a tax issues we will be facing more and more in the "new" ireland. Only a short while back, losses on the disposals of PPRs would have been a very rare occurence.


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## What the (24 Mar 2010)

In that case so my best bet would be to rent out the house rather than selling it when I move home. If it is rented for 5 years or so (I have lived in it for 3) then any CGT gains I make can be offset against 5/8ths of the loss when I do sell the property. Am I understanding you correctly.


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## Breninio (24 Mar 2010)

Not quite as simple as that I'm afraid. Even taking the unkown factors out of your suggested plan (e.g what will the value of the property be in 5 years, will you have other chargeable gains against which you can offset a loss), the fact that you are leaving Ireland will complicate matters. You will need to look at the treatment of the loss under rthe tax rules of the country you are moving to. For Irish CGT purposes, the disposal of property in the State will be a CGT event irrespective of where you move to as it is a specified asset. However if you are non resident and non ordinarily resident at the time of disposal it will only be gains from the disposal of other specifuied assets that may be offset for Irish CGT purposes. What you will need to do is look at the equivalent rules in your new country of residence to dtermine the treatment of the disposal under their rules and the avilability of any loss for offset against gains.


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## What the (24 Mar 2010)

Thanks Breninio

I am not moving country, only moving to the other end of this one. Irish born. At the moment similar houses to mine are selling for 240k. Thats 125K less than I paid and I doubt any recovery will see me back to those prices. I do realise there are imponderables (ie I need to have CGT income and I need to realise the loss) but I was just wondering what the tax position is.


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## Breninio (24 Mar 2010)

Oh sorry, for some reason I thought you were leaving the country. Well then yes, if you did not occupy as PPR for the next 5 years then it is my understanding that a portion of any eventual loss would be available for offset against other gains


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## txirimiri (24 Mar 2010)

I  may to totally wrong about this but I understood that, in respect of Capital Gains tax, if one was selling a PPR that had been rented out for a portion of the time owner, the capital gains was calculated from the time the property was first rented until it ceased being rented, rather than from the time the property was first bought until it ceased being rented? I.e. I buy a house in 2002 for 100,000 and live in it as my PPR. In 2004, I move abroad and rent it out - it becomes an investment property liable for CGT and is now worth 200,000. I return in 2007, with my house now worth 300,000 and decide to sell. My liaibilty for CGT is based on the difference between the 2004 and the 2007 price i.e. 100 grand and not the 2002 and 2007 price i.e. 200 grand.

If this is the case, does Capital Gains loss not work the same way? I.e. house bought for 300 grand in 2007, rented out in 2010 when it is now worth 150 grand, sold in 2015 when it is still worth 150 grand (let's say for conjectures sake ...). individual now unable to carry forward capital gains loss as there was none for the time the property was an investment?


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## Brendan Burgess (24 Mar 2010)

You are almost totally wrong.

The gain or loss is calculated from the time of ownership to disposal. 
It is then apportioned over the period during which it was not your PRR.
It does not matter when the gains or losses arose.

For example:



purchased|1/1/2000|100
Let|1/1/2005|value 300
sold|1/1/2010|value 150
The gain is €50 and you pay CGT on  half of this. 

You don't get a tax free gain of €200k on your ppr and then a tax loss of €150 for CGT purposes.

It may be unfair, but that is how it's calculated.


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## txirimiri (24 Mar 2010)

Interesting, thanks Brendan

Rather worryingly in retrospect, this was the advice I was given by a (recently) qualified tax accountant in 2007 in respect of my ppr which I had bought in 2004, rented out in 2006 upon moving abroad and was pondering selling in the future. 

All immaterial now, as my house is currently worth less than it was bought for in 2004 and I'm not selling


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## Breninio (25 Mar 2010)

Wow txirimiri, you are correct that it is worrying that you could get advice that was so wrong from a qualified advisor. Just to note, if you were required to be abroad for reasons of employment, that period will also be a deemed period of occupation when calculating the tax free portion of any gain on a subsequent disposal.


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## txirimiri (25 Mar 2010)

Breninio said:


> Wow txirimiri, you are correct that it is worrying that you could get advice that was so wrong from a qualified advisor. Just to note, if you were required to be abroad for reasons of employment, that period will also be a deemed period of occupation when calculating the tax free portion of any gain on a subsequent disposal.


 
Really? We were deducted trs because we were renting out our house while working abroad and it was therefore not considered our ppr. Seems strange therefore that it would be deemed an occupied ppr for the same time period if it were sold! Means that two different parts of Revenue are defining the same activity (i.e. not living in ppr and renting it out because required to work abroad) differently for tax purposes?


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## Brendan Burgess (25 Mar 2010)

> We were deducted trs because we were renting out our house while working  abroad and it was therefore not considered our ppr.



There is nothing odd about this. You received rental income and you claimed the interest paid on your mortgage against that in calculating the rental profit. 


> Rather worryingly in retrospect, this was the advice I was given by a  (recently) qualified tax accountant in 2007



It is possible that your tax accountant gave you incorrect advice. However, it is far more likely that you misunderstood him.

Brendan


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## txirimiri (26 Mar 2010)

My point is not that its odd that we didn't receive trs while renting out our house - its perfectly logical. 

My point is that Revenue are treating the same activity differently when assessing tax liability. If you are treated as an investor when renting out your house, even if it is your only residence, it seems odd that the same period is then treated by the same organisation as being a period of occupation in your ppr when assessing liability for CGT. I am not complaining about it as it is potentially to my advantage if in the future I sell my house for more than I paid for. I am pointing out that it is inconsistent on the part of the Revenue Commissioners.

I think I am capable of understanding advice from a tax accountant. I have received correct advice and incorrect advice from different accountants over the years.


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