Letter to the Editor

This letter was sent by a reader to our Money Mentor, Margaret Nolan.

Dear Money Mentor,

I own a holiday home near my family farm in Waterford which I bought in the year 2003 for €100,000.

Many years ago this was part of my family’s property but was sold. I have made some renovations to it over the years, costing about €50,000. I wish to sell the holiday home now and would like to know if I will have a capital gains tax liability if I do. It is currently valued at €220,000.

Regards, Mary

Hi Mary,

This holiday home is classified as an investment property so, as such you will be liable to pay capital gains tax (CGT) on any gain. I am assuming you live elsewhere. The revenue allows enhancement expenditure to be off-set against capital gains, once the enhancement is still in place when you sell. Therefore, the gain is €120,000 if you sell the property for €220,000. If all the €50,000 renovation cost is allowable as ‘enhancement’ the capital gain can be reduced to €70,000. You can deduct a personal capital gains tax exemption of €1,270 from any gain, and the balance of €68,730 is taxable at 33%. You should avail of professional tax advice before selling.

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