Selling a house? Learn what changes regarding tax exemption on capital gains.
If you are planning to sell a property you bought a year or more ago, the new changes regarding tax-exempt capital gains in IRS may apply to you. Understand what changes in this article.
What changes in capital gains tax if you want to sell a house?
If you bought a house a year ago and want to sell it, you may benefit from the exemption from IRS on capital gains. The change in the law was proposed by the new Government, expanding the tax benefit to more owners of own and permanent housing, reducing the minimum period from 24 to 12 months.
According to the legal basis that can be read on Idealista, in practice, this new measure reduces the time needed to own a house between buying and selling, in order to avoid paying capital gains tax. The idea is that it will take effect on December 31, 2023.
"The government proposed significant changes in the taxation of real estate capital gains to make the tax system more equitable and adjusted to the current economic reality," reads the explanation by Miguel Paixão, senior lawyer in the tax law department of Belzuz Abogados in Portugal. In his view, "these measures aim to simplify the system, promote housing mobility, revitalize urban centers, and attract foreign investment, but they require a rigorous assessment of their impacts to ensure effectiveness without negative effects on the real estate market."
We will then see what are the main changes that will be implemented regarding the capital gains from the sale of a house:
Minimum deadline for selling houses increases to 12 months.
"The owners who sell their own permanent residence to acquire another permanent residence can only have lived in it for one year (before the minimum period was two years), as long as they reinvest the sale value in the new property within three years," clarifies Belzuz's senior lawyer to idealista.
Benefit of exemption can be used more than once.
"The limit that had previously been imposed, which only entitled owners who had not benefited from this regime in the current year or the previous three years, was also revoked," reads the lawyer's clarification.
Adjusted and proportional capital gains calculation
It is expected that the Government may also modify the calculation of capital gains with regard to the monetary devaluation coefficient. This coefficient, which adjusts the acquisition value of properties for inflation, despite being updated annually, its application does not reflect the current economic reality. With the update, the value of capital gains to be taxed will be fairer and proportional to the actual gain obtained by the seller, correcting a tax distortion that has penalized taxpayers. This can be read, finally, in the analysis by the specialist in the Idealista article.
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