I rented my basement. Am I liable for capital gains tax on the sale of the house?

My house is now on the market, so this request is really urgent. I bought a three-story Victorian house twenty years ago and a few years later rented the basement to make it a self-catering apartment. I took the stairs off, and it’s only accessible through its own side door. I signed up for PRTB etc.

My question now is how is CGT calculated? I think it’s 33 percent on the earnings since purchase. Is it only the floor space that decides how much of the sale price to tax? The purchase price included a house and a garden, as well as generous parking, which adds a lot to the value of the house now.

How can I estimate the CGT I have to pay? It sounds like double taxation because I have paid rent taxes all these years.

Do I also have to pay a second property tax? (My lawyer thinks I might – it existed for a few years a few years ago.)

Suzanne O’Neill writes: First, the capital gains tax rate is 33 percent on taxable gains realized on the sale of property.

The seller could benefit from the principle allowance for private residence (RPP) for all or part of the capital gains tax resulting from this sale. PPR relief is available after the owner has lived in the property for the duration of their property as a PPR.

A breakdown will be required as the property has been fully used as PPR for a period of time and subsequently the basement has been used as a rental. When there is a change in use of part of a building, revenue refers to a fair and reasonable method applied. If the property is now sold as a single unit, a breakdown on the basis of square footage is likely to provide a reasonable result.

The seller may have been eligible for one bedroom rental relief during the time the basement was rented, even if it is a stand-alone unit.

To benefit from the reduction for the rental of a room, the gross rental income should have been lower than the exemption ceiling (€ 14,000 since 2017, against € 12,000 in 2015 and 2016). In this case, the rental does not have the effect of restricting the exemption from the PPR.

When the ancestor of the local property tax, the private housing tax in principle applies, both must be up to date.

Suzanne O’Neill is Tax Partner at RSM Ireland, rsmireland.ie

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