Gintax answers Sunday Independent readers’ questions on tax.
Article published on 5 January 2025

I have a home in Dublin that I use a few times a week. Would I pay CGT if I sold that property?

Q1 I purchased a property in Dublin in 2017 and married my partner in 2022. We have since had children and we primarily reside in my partner’s home in the country (his second property), which he purchased in 2019. His original home is rented out.

I currently spend one to two nights a week in my Dublin property as I have to go to the city every week for work, and I rent out a room to a lodger. I would like to upgrade the Dublin property, such as by adding parking and a third bedroom, and hold onto that property until after our twins are finished with college in about 15 years’ time. Another option is selling that Dublin house, which is currently worth about €700,000, and buying a bigger one in the city.

My query is what would our CGT liability be if I sold the house instead of extending it and when exactly would this tax be triggered? Is there any CGT relief available? If I would be subject to a large tax liability, I wouldn’t sell the Dublin property but let the kids worry about the tax bill when they eventually inherit it.  

Lorcan, Co Cork

The sale of property is within the scope of Capital Gains Tax (CGT), with a rate of 33 per cent applying to any gain.

However, a CGT exemption known as Principal Private Residence (PPR) relief can apply on disposal of a person’s only or main residence.

On the basis that you lived in the property up until your marriage as your main home then PPR relief should be available by reference to those years.  It appears unlikely that relief would be available by reference to any subsequent period as the “main residence” condition does not appear satisfied.  In any case, a married couple can only have one PPR allocated between them at any time. 

In order to calculate the CGT, we first calculate the gain on disposal in the normal manner.  This gain is then reduced by a fraction, calculated as your period of occupation over the period of total ownership.  On the basis that the house ceased to be your PPR in 2022, then your period of occupation is five years and you can also include the final year of ownership as deemed occupation.  As you will have owned the house for seven years, the relief on a current sale should operate to reduce the taxable amount by circa 85 per cent.  

Assuming the position remains the same and you decide to retain the house for the longer term then as the years progress, the exempt portion of the gain will reduce.

If you or your spouse have capital losses, then these can be used to reduce any taxable gain.  We would also expect that the upgrade costs such as the extension should be available as a deduction.

Any CGT will be triggered in the year of disposal – with a payment date of 15 December, extended to 31 January of the following year in the case of December disposals. 

CGT does not arise on death, but the children will be within the scope of Capital Acquisitions Tax on the inheritance of the property.

‘Should we borrow €300,000 from my sister to buy a home?’

My husband and I are 35, rent in Wicklow, and are trying to buy a home there. However, as we both work in the arts, our earnings are quite modest, and we only qualify for a mortgage of €250,000. Obviously, there’s very little housing in that price range here and we keep getting outbid. However, my sister recently sold her business for about €4m and she’s willing to loan us – but not gift us – money to help with a house purchase. What would the tax implications be of us borrowing €300,000 from her and repaying her back over say, 20 years?

Ciara, Co Wicklow

The tax implications of the loan will essentially depend on the level of interest (if any) applied. 

The arrangement will be within the scope of Irish Gift Tax i.e. Capital Acquisitions Tax (CAT) where a benefit is provided.  

In the case of a loan, a benefit will arise where the interest rate is lower than the open market price.  It is accepted by Irish Revenue that this price is the highest rate of return obtainable on investing the funds on deposit. 

So where the loan is interest free, then both you and your husband would be deemed to receive an annual benefit of €3,750 each, assuming a 2.5 per cent deposit rate.  The annual small benefit exemption of €3,000 may also be available to each of you.

CAT at 33 per cent will arise to the extent your total taxable benefits exceed your available tax free thresholds, which for you as a sibling is Group B (€40,000) and for your husband is Group C (€20,000). 

There are additional disclosure rules for such loans but these will only apply where the total amount of such beneficial “family” loans exceeds €335,000.

If the loan carries interest equal to or higher than the deposit rate, then it should not trigger any CAT implications.  Your sister will be within the scope of Irish income taxes on the receipt of interest income.  In the event that she is non Irish resident, then the position is more complicated and there may be a withholding tax obligation on the interest payments.  Your sister’s tax position will depend on her country of residence.  .