When selling your home, there are many initial questions that will often come to mind – how much will you earn from it? Where are you going to move to? Is it ready to be put for sale? This makes it easy to forget about the tax implications that will affect you when selling your home.
If the property you’re selling is your main residence, then you pass the bright-line property rule, which is when you need to pay tax when you buy and sell a residential property within five years unless an exception applies. The exclusions to this rule are when:
- The property is your main/family home.
- You inherited the property.
- You’re the executor or administrator of a deceased estate.
The person selling the property will decide if it counts as their main residence, based on the exclusion criteria. If you make a loss on the sale instead of a profit, then the losses would be ring-fenced.
The taxes you pay when selling property also depend on:
- Your intent at the time of purchase: if the property has been bought with the intention of selling it again, you have to pay tax on any profit you make from the sale. This applies even if the intention to sell isn’t the only reason for buying.
- Your history of buying and selling: If you have an evident history of buying and selling property, then you could count as a property dealer. If this is the case, you may have to pay tax when you sell a property, even if it’s your family home.
- Whether you’re involved with the property industry: if you’re a dealer, developer or builder, you can be liable to pay tax on the profit you make from any property you sell that were bought as part of your property or building business.
