Capital Gains Tax on Sale of Second Property

superd1978

Hi folks,

Im wondering can someone advise me on Capital Gains Tax on Sale of Second Property.

My scenario, I work remote so planning to purchase a holiday home so I can get away from the city. It won’t be my primary residence, but will be used very frequently.

I plan to purchase for 230k, and put about 60k into renovation. It’s not in a bad state, but definitely needs investment. So circa 290k total.

My question, should I decide to sell in 5 or 6 years, for 300k, how much of the 60k renovation investment is tax deductible? I would have assumed it all is… but may be wrong there.

Thanks in advance.

Claw Hammer

https://www.boards.ie/discussion/2058289972/capital-gains-tax-on-sale-of-second-property

Capital expenses are allowable. This would be items which become part of the property such as new windows, heating system but does not include items such as carpeting or electrical appliances. Your purchase expenses such as solicitor fees, land registry fees and stamp duty as well as you sales costs are all deductible.

DFB-D

https://www.boards.ie/discussion/comment/120406738#Comment_120406738

Windows and heating are wasting assets. Very hard to claim these as enhancements in 5 or 6 years (not impossible but see the rules relating to reflecting in the state of the property at time of disposal).

Think Enhancements that will still add value in the future rather than cap ex.

So extension structure, reroofing, etc.

superd1978

Thank you both. Windows will cost me circa 15k, so ideally I’d want some ROI. It surely enhances the property in terms of value, efficiency etc.. would seem ridiculous that windows upgrade would not be deductible. The current windows are hanging off the hinges.

DFB-D

https://www.boards.ie/discussion/comment/120423586#Comment_120423586

Sorry I am not trying to put you off, but be prepared that the entire 60k is not allowable.

Just to give an idea of Revenue's view on this - the current windows are already reflected in the house price. A replacement like for like ( + allowing for more modern materials) is not enhancement, just repair.

But look some things to watch out for when checking whether costs are allowable:

1. Making good dilapidation - perhaps... But dilapidated pretty much means repair of the property to make it habitable...may not be applicable.

2. Upgrade to what was there previously - e.g. Very energy efficient windows that help increase BER rather than standard pvc double glazed windows.

3. Clearly adds value... Maybe, maybe not for windows. Pvc windows are kind of standard these days...

But look talk to a tax advisor or accountant with CGT experience at some stage before you sell,as I said earlier enhancements must be reflected in the sale price.

superd1978

Thanks again, definitely helped a lot. Will do.