I rented out my basement. Am I liable for capital gains tax when selling the house?

Property Clinic: If the property is being sold as one unit, an apportionment is likely to be applied

The capital gains tax rate is 33 per cent on chargeable gains. Photograph: iStock

The capital gains tax rate is 33 per cent on chargeable gains. Photograph: iStock

 

My house is now on the market, so this query is really urgent. I bought a three-storey Victorian house twenty years ago and a few years later I let out the basement as a self-contained apartment. I removed the stairs, and it is only accessible via its own side door. I registered with PRTB etc.

My question now is how is CGT calculated? I think it is 33 per cent on the gains made since purchase. Is it purely the floor area that decides how much of the selling price is to be taxed? The purchase price included a house and a garden, as well as generous parking, which is very much adding to the value of the house now.

How can I estimate how much CGT I need to pay? It feels like double taxation as I have paid tax on rent all these years.

Also do I need to pay a second property tax as well? (My solicitor thinks I might – it existed for a few years a few years ago.)

Suzanne O’Neill writes: Firstly, the capital gains tax rate is 33 per cent on chargeable gains made from the sale of the property.

The seller would be able to avail of principle private residence (PPR) relief for all or some of the capital gains tax arising from this sale. PPR relief is available once the owner has lived in the property for the entire time they have owned it as their PPR.

An apportionment will be required as the property was entirely used as a PPR for some period and thereafter the basement was used as a letting. Where there is a change of use of part of a building, Revenue refers to a just and reasonable method being applied. If the property is now being sold as one unit, an apportionment on the basis of square footage is likely to provide a reasonable outcome.

The seller may have been eligible for rent-a-room relief during the time the basement had been rented even though it is a self-contained unit.

In order to avail of rent-a-room relief, the gross rental income would need to have been below the exemption limit (€14,000 since 2017, up from €12,000 in 2015 & 2016). In that case, the letting does not result in PPR relief being restricted.

Where the forerunner of local property tax, the non-principle private residence tax applies, both must be up to date.

Suzanne O’Neill is a tax partner at RSM Ireland, rsmireland.ie

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