Calculating Capital Gains Tax: Everything you need to know
Capital Gains Tax (CGT) can feel confusing, but with a few clear steps, it’s pretty simple to understand. Whether you’re selling a property, giving a big gift, or just curious about ways to save, this blog post will walk you through everything you need to know about CGT in Ireland. We’ll show you how to calculate it, what exemptions you can use, and how Tax Return Plus can make filing your CGT stress-free.
In this blog post, we will cover the following:
• What is capital gains tax?
• How much is capital gains tax in Ireland?
• How to calculate capital gains tax?
• What capital gains are exempt from being taxed?
• Example of capital gains tax being calculated
• Why choose Tax Return Plus to file your capital gains tax return?
• FAQs
What is capital gains tax?
Capital Gains Tax is a tax on the profit you make when you sell, gift, or transfer certain assets. In Ireland, capital gains tax applies to individuals and businesses, meaning you may owe CGT if you profit from selling assets like property, shares, or investments. Capital Gains Tax is calculated based on the gain—so if you originally bought an asset for €100,000 and sold it for €150,000, CGT would be owed on the €50,000 gain.
Assets subject to CGT in Ireland include:
• Real estate and property.
• Shares and other financial investments.
• Certain valuable possessions, like artwork or furniture.
How much is capital gains tax in Ireland?
The capital gains tax rate is 33%. This rate applies to most assets, whether it’s property, shares, or other investments. For example, if you gain €10,000 from selling shares, you’ll owe €3,300 in capital gains tax. As an Irish taxpayer, you can make up to €1,270 in profit each year without paying tax.
How to calculate capital gains tax?
Calculating capital gains tax in Ireland is straightforward.
Here’s how to do it step by step:
1. Determine the acquisition value
• This is the amount you originally paid for the asset.
• Include any additional costs, such as purchase fees.
2. Determine the disposal value:
• This is the price you sold the asset for.
• Subtract any selling costs, like agent fees.
3. Calculate the taxable gain:
• Use the following formula: (Taxable income = Disposal value – Acquisition value)
4. Apply the capital gains tax rate:
• The current CGT rate in Ireland is 33%.
• To find out how much tax you owe, multiply your taxable gain by this rate.
5. Consider annual exemption:
• Each year, you can make up to €1,270 in gains tax-free.
• If your taxable gain is below this amount, you won’t owe any CGT
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What capital gains are exempt from being taxed?
In Ireland, some capital gains are tax-free!
Here are the main exemptions you should know about:
1. Assets from a spouse
If you transfer assets to your spouse, you don’t have to pay any capital gains tax. It’s a smooth way to share your wealth without worrying about taxes.
2. After a death
When you inherit assets after someone passes away, you don’t have to pay CGT at the time of inheritance. Just keep in mind that if you sell those inherited assets later, capital gains tax may apply.
3. Principal private residence relief
If you sell your house or apartment, the profit is usually exempt from capital gains tax thanks to principal private residence relief.
To qualify:
• You lived in it as your main residence.
• Used all the property as your home.
4. Site given to a child
Giving a piece of land (up to 1 acre) worth €500,000 or less to your child to build a home can be tax-free. Just remember, your child needs to use the land to build their main home for the tax exemption to apply.
5. Farm or business
Selling a farm or business might come with some helpful tax breaks. If you meet certain criteria, you could qualify for special reliefs, like business relief or agricultural relief, which can reduce your capital gains tax.
6. Other exemptions
There are also other situations where you might not have to pay capital gains tax. For example, selling personal belongings like old furniture or artwork could be tax-free up to a certain amount.
Example of capital gains tax being calculated
Let’s say you sold an investment property for €400,000 that you purchased for €250,000.
Here’s how you would calculate your capital gains tax step by step:
1. Determine the acquisition value:
• Purchase price: €250,000
• Additional costs (e.g., legal fees): €10,000
• Total acquisition value = €250,000 + €10,000 = €260,000
2. Determine the disposal value:
• Sale price: €400,000
• Selling costs (e.g., agent fees): €15,000
• Total disposal value = €400,000 – €15,000 = €385,000
3. Calculate the taxable gain:
• Taxable gain = Disposal value – Acquisition value
• Taxable Gain = €385,000 – €260,000 = €125,000
4. Consider deductions:
• As an Irish taxpayer, you can make up to €1,270 in gains tax-free.
• Therefore, the first € 1,270 of the chargeable gain is exempt from CGT. Chargeable Gain €125,000 less € 1,270 personal exemption equals a total of € 123,73
5. Apply the CGT rate:
• The current CGT rate is 33%.
• 33 % CGT owed = €123,730 at 33% = €40,831
So, in this case, after selling your property, you would owe €40,831 in capital gains tax.
Why choose Tax Return Plus to file your capital gains tax return?
At Tax Return Plus, we make filing your capital gains tax return easy. Say goodbye to confusion and stress—our experts are here to guide you every step of the way. We know exactly which exemptions and deductions apply to your situation, whether it’s from selling a property or transferring assets. We’ll ensure you claim every penny you deserve, so you can keep more money in your pocket.
But that’s not all.
We handle all the paperwork and deadlines, saving you from costly penalties. Our approach is all about making tax season not just easy, but enjoyable. You will get a personalised experience rather than a faceless transaction. Contact us today!
FAQs about capital gains tax
What were the CGT rates historically?
Capital gains tax rates in Ireland have changed over time. The rate was 20% until 2008, then it gradually increased to 22%, 25%, and 30% in the following years. Since 2012, the CGT rate has been 33%.
What is the 7-year rule for CGT exemption?
The 7-year rule for CGT exemption means you can get tax relief on capital gains when selling your main home if you’ve lived in it as your primary residence for at least seven of the last nine years.
What date do you need to pay your capital gains tax by?
You need to pay your capital gains tax by December 15th of the year in which the sale took place. This deadline applies to any profits made from January 1 to November 30 of that year.
If the sale took place in December, you need to pay the capital gains tax by the following January 31st
Once the tax has been paid you have to look at filing a Capital Gains Tax return before October 31st of the following year.
How much money can you gift to a family member tax-free in Ireland?
You can give gifts of up to €3,000 to anyone each year without paying tax. If you give more than this amount, the extra may be taxed under the capital acquisitions tax.