When selling your home, one of the main concerns people have is how much tax they could potentially have to pay on the profits made on disposal of the property. In this blog post, we will go through everything you need to be aware of in relation to Principal Private Residence Relief in Ireland.
Homeowners may be entitled to relief from some or all of the Capital Gains Tax on profits from disposing of their homes. The amount of relief that can be claimed as relief will depend on a number of factors which we will discuss in more detail.
Factors that determine the amount of PPR relief you are entitled to:
What happens when you own two properties?
A person can have just one principal private residence that is their main residence. This will be the residence where you spend most of your time. Persons who own more than one household should notify the Revenue Commissioner which property is their main residence to avoid any confusion and complications when it comes to selling their main residence.
You have 2 years from the beginning of your occupancy of the home as your main residence to notify revenue, if you do not do this the Inspector of Taxes will be the person who will be determining where is your principal private residence.
Time not using the property as the main residence
You will only be entitled to relief for the portion of the time you used the property as your main residence. Let’s say you owned the property for 5 years but had rented it out for the first 2 years and then moved into the property subsequently and used it as your main home. In this scenario you would only be entitled to PPR relief of 60% on any profits made on the disposal of the property.
What about time spent away from home due to work commitments?
There are certain times where absence from the home will still be counted towards your PPR relief calculation. These include:
- You cannot live in the house due to your place of work whether you are elsewhere in Ireland or abroad (up to a maximum of 4 years). It is important to note that these periods may only be ignored if you use the property as your main residence both before and after this time of absence. Therefore, if you are working Monday-Friday in another location and return home every weekend you will still be considered to be occupying your home as your main residence.
- for the last 12 months before disposal of the property there is a period of grace where you will be deemed to have been occupying it even if you have moved to a new home.
- If you buy a site which you plan on building a home and the house build is completed within 12 months of the acquisition of the land, the period from when the land is bought until the person moves into the new home will be counted as a period of occupation. If the time between acquisition and moving into the new home goes over 12 months then there will be apportioned relief for this period.
Am I allowed relief for the garden/land and area surrounding the house?
Homeowners are entitled to PPR relief for up to 1 acre or 0.405 hectares around the house once it has been incorporated into the garden of the house. If there is an adjoining plot of land that is obviously not part of the plot the house and garden sit on is disposed of as part of the sale of the property, relief will not be available on this portion of the sale.
If the home is sold and a part of the garden is retained and sold separately at a later date then this will not qualify for PPR relief on the second sale.
I use a part of my house for my business, how does this effect PPR relief?
If you are using a part of your home exclusively for running a business, trade or profession then relief will be restricted for this portion of the home. For example letting out a room for Airbnb.
If this part of the home is not being used exclusively for the business and is used also for personal use then relief may not be restricted. Once you are only claiming a percentage of the costs of this associated with room through your business. For example, if a room was used as a business office during the day and as a study room in the evening, apportionment would not be required.
If you have a home office that you use for working remotely for your PAYE job then this is acceptable to be included for relief.
Residence provided to a dependent relative
You may also be entitled to PPR relief on a property that is used by a dependent relative. Examples of persons who qualify as a dependent relative who is incapacitated by old age or cannot maintain themselves, widowed father or mother.
PPR Calculation Example
Let’s now go through a specific example for calculating the capital gain that is not eligible for PPR relief.
- 1 January 2009 – John buys a property for €160,000 and lives in it continuously until 31 December 2013 (5 years).
- Due to work commitments he then has to move away from 1 January 2014 to 30 June 2016 (2.5 years).
- John return to the home from 1 July 2016 to 30 June 2017 (1 year).
- Unrelated to work he then moves abroad for a year and rents a property in Spain from 1 July 2017 to 30 June 2018 (1 year).
- John returns to the home for a further 3 years and sell the home for €280,000 on 30 June 2021 (3 years).
| Proceeds | €280,000 |
| Cost | €160,000 |
| Gain (A) | €120,000 |
| Periods Occupied | 9 years |
| Deemed Occupation | 2.5 years |
| Total Deemed Occupation | 11.5 years |
| Period of Ownership | 12.5 years |
| Percentage of Owner Occupier/ Relief (B) | 92% |
| Chargeable Gain = A x (1 – (B)) | €9,600 |
A full guide on PPR relief with more examples can be found on Revenue.ie through the following link:
If you liked this blog post, you may also be interested in a taxation guide for operating an Airbnb in Ireland.
Disclaimer: This blog post is for informational and educational purposes only and should not be construed as financial advice.
