Understanding Property Taxes - Here are some Important Property Taxes You Need to be Aware Of
When you’re downsizing your home in Ireland, it’s important to consider the tax implications of the sale.
Depending on the value of your home and the amount of profit you make on the sale, you may be liable for capital gains tax (CGT) or other taxes.
In this short article, we’ll explore what every Irish homeowner needs to know about taxes before downsizing.
Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is a tax on the profit you make when you sell an asset, such as a home or investment property.
In Ireland, the current CGT rate is 33% for residential property. This means that if you sell your home and make a profit, you’ll be liable to pay CGT on that profit.
However, there are some exemptions and reliefs available.
For example, if you’ve lived in your home as your primary residence for at least three of the past five years, you may be eligible for the Principal Private Residence (PPR) relief.
This means that the first €1,270,000 of any profit you make on the sale of your home will be exempt from CGT.
Stamp Duty
Stamp Duty is a tax on documents that transfer ownership of property. In Ireland, the current stamp duty rate for residential property is 1% of the sale price.
This means that if you sell your home for €500,000, you’ll be liable to pay €5,000 in stamp duty.
There are some exemptions and reliefs available for stamp duty, depending on the circumstances of the sale.
For example, if you’re over 65 and selling your primary residence, you may be eligible for a stamp duty exemption.
Inheritance Tax
Inheritance Tax is a tax on the assets of a deceased person that are passed on to their heirs.
In Ireland, the current inheritance tax rate is 33% on amounts over €335,000. If you’re downsizing your home and plan to leave the proceeds to your heirs, they may be liable for inheritance tax on the sale proceeds.
However, there are some exemptions and reliefs available. For example, if you leave your home to your spouse or civil partner, they won’t be liable for inheritance tax.
There are also reliefs available for certain types of assets, such as family businesses or farms.
4. Local Property Tax
Local Property Tax is an annual tax on residential property in Ireland.
The amount you pay depends on the value of your home and is calculated as a percentage of that value. If you’re downsizing your home, you’ll need to consider the local property tax implications of the sale.
If you’re selling your primary residence and buying a new primary residence, you can transfer your local property tax liability to your new home.
However, if you’re downsizing to a rental property or second home, you may need to pay local property tax on that property as well.
In summary, there are several tax implications to consider when downsizing your home in Ireland.
Capital Gains Tax, Stamp Duty, Inheritance Tax and Local Property Tax are all potential taxes that you may need to pay.
However, there are also exemptions and reliefs available that can help reduce your tax liability.
It’s important to consult with a tax advisor or estate agent who can help you understand the tax implications of your specific situation.
If you’re considering downsizing your home in Ireland, we recommend working with a reputable estate agent who can help you navigate the tax implications of the sale.
Contact us today to learn more about our downsizing services and how we can help you make the most of your downsizing journey.
You can call us directly on 01 6230083 or you can request a callback by filling out this form you will find here
