Renovation and CGT if I rent

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confused_

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Hi,

I bought a house for €123,000 and made significant renovations (rewire, replumb, insulation etc.) the property is now worth €280,000. it has been my Principal Private Residence (PPR) the whole time.

I am wondering if it is best to rent or to sell it.

If I rent, can I ensure that the enhancement expenditure is recognised and the property is worth €280,000 at the point of renting, then should I sell it in the future, any CGT would be on any increase in value from €280,000? or will revenue ask for a percentage of the value of increase based on the number of years it was rented out (and not my PPR)?
 
So hold on

I buy a house at 50k, live in it for 30 years; at which time its now valued at 500k.

Time to retire, so I buy a cottage in Kerry & that becomes my PPR & I rent out my former home.

Five years later, my former home is now valued at 550k and I want to sell.

So are you saying CGT is calculated from a 35 year old market value (50k ->550k), notwithstanding the fact that it was my PPR for 30 years?
 
DannyBoyD said:
So hold on

I buy a house at 50k, live in it for 30 years; at which time its now valued at 500k.

Time to retire, so I buy a cottage in Kerry & that becomes my PPR & I rent out my former home.

Five years later, my former home is now valued at 550k and I want to sell.

So are you saying CGT is calculated from a 35 year old market value (50k ->550k), notwithstanding the fact that it was my PPR for 30 years?
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CGT is calculated based on the original purchase price (€50K - indexed for inflation if before 2003), the selling price (€550K), and the proportion of time of the ownership period the property was rented out. In this case I think it would be 4/35ths of the capital gain after indexation of the purchase price if applicable (less allowable expenses?) that would be assessable for CGT. My recollection is that one year after it ceases to be your PPR is discounted but I could be mistaken or out of date on that. (This is a very simplified summary this doesn't take into account all potentially relevant factors and may not be completely current so caveat vendor). It's definitely not a case of €550K - €500K being the amount assessable for CGT as you originally suggested.

Edit: I probably could've saved on the typing...

Principal Private Residence (PPR) Relief

This is an explanation of what relief on cgt is available for a Principal Private Residence (PPR)
www.revenue.ie www.revenue.ie
 
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If you bought the house 35 years ago, in 1989, then the cost is indexed up by 1.503 = 50k x 1.503 = 75k
The gain, € 550k - € 75k = € 475, is apportioned according to the length of time it was your PPR + 1 year and Rented - 1 year

In this case you would get relief for 30 years +1 = 31 out of the 35 and be liable for tax on 5 year -1 = 4 years out of 35

So you get relief of 31/35 x € 475k = € 420k
Tax would be due on € 475k - € 420k = € 55k
Tax at 33% = € 18k
 
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Op does not have to pay cgt from when they purchased their property as it was their ppr.

How much was spent on refurb is immaterial.

Badly worded, but that was the point I was making.

And the 'thats wrong' was equally misleading.

Thank you to @jpd for doing the calcs.
 
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DannyBoyD said:
Of course it is.
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This is completely incorrect and totally misleading to the original poster!
DannyBoyD said:
IANATE

Market value starts from the time property ceased to be your PPR.
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The value at the time that it ceased to be one's PPR and was rented out is completely irrelevant. Some proportion of the total gain over the ownership of the property is what's assessable. This is based on the selling price and the original acquisition price as explained above.
 
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The capital gain between the date of purchase and date of sale is assumed to have happened in equal amounts per year of ownership

It does not follow the actual gain and/or loss statistics - where the property may have gained in value, then fallen in value, then gained again
 
Thank you everyone for the response. Can I ask another question.

If I continued to live in the property and participated in the rent a room scheme, whereby I can get €14,000 per annum in rent tax free. Does that have any implications on CGT should I sell the property in the future.

I am trying to decide whether to keep my asset and get taxed (to high hilt) on rent and have a headache with having tenants. or just sell (and potentially lose out as my money will lose value unless invested.

Thanks again for all the help and insight!
 
confused_ said:
If I continued to live in the property and participated in the rent a room scheme, whereby I can get €14,000 per annum in rent tax free. Does that have any implications on CGT should I sell the property in the future.
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If it is always your PPR as long as you own it and the only ever rental is under the rent a room scheme then it should qualify for full PPR CGT relief.

Principal Private Residence (PPR) Relief

This is an explanation of what relief on cgt is available for a Principal Private Residence (PPR)
www.revenue.ie www.revenue.ie
 
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