I have rented out my home for a few weeks a year over the past three years. I have paid tax on the rental income but want to know if I would have to pay capital gains tax (CGT) if I ever sell my home? In those weeks, it has always remained as my principal home while I travelled. If I stop renting out the property for the next few years, will that make any difference?
A gain arising on the disposal of an asset is chargeable to Capital Gains Tax (CGT).
Principal Private Residence (PPR) relief applies to the sale of an individual’s only or main residence and land of up to one acre. It is calculated on a pro rata basis on a comparison of the period of occupation of the premises as a PPR and the total period of ownership. An individual’s PPR is exempt from CGT if the individual has used the house as their PPR throughout the period of ownership.
There are periods in which owners will be deemed to have occupied their property while not residing in the house. These periods include time spent working abroad and employer-required absences in Ireland. The following conditions apply:
– The individual must have lived in the PPR both before and after the period of absence;
– The individual had no other house that qualified as a PPR during that period;
– In the case of employer-required absences within Ireland, the period of non-occupation cannot exceed in aggregate four years;
– In the case of employer-required absences within Ireland, the period of non-occupation was due to the location of his/her work or conditions imposed by the individual’s employer.
The final 12 months of ownership are also deemed periods of occupation for the purposes of the PPR exemption.
As you have not occupied the property as your PPR for a few weeks a year over the past three years, part of the gain will always be chargeable to CGT, unless the scenarios outlined above apply to you. If you stop renting the property for the next few years, it will not change this position.
You should also be entitled to the annual exemption of €1,270.
Niamh Horgan, tax manager, RSM Ireland, rsm.global/ireland
