Whenever a property is sold, the expectation is that there will be a profit, i.e. that the sale price will be higher than the purchase price. This profit corresponds to capital gains, which, as a rule, are taxable by the IRS at 50%.  There are, however, situations in which taxpayers are exempt from paying capital gains. Find out which ones.


The house you sold was acquired before January 1, 1989

Anyone who decides to sell a residential property that was acquired before January 1, 1989, the year the IRS code came into force (there was no such tax before), is exempt from paying capital gains. The same applies to building plots bought before June 9, 1965. Despite this exemption, don't forget that you have to mention these sales in your tax return.


You're over 65 or retired

People who are over 65 or retired can also benefit from the exemption on real estate capital gains. To do this, in the six months following the property transaction, they must invest the value of the deal in an insurance contract (a PPR, for example), in a contribution to the public capitalization scheme (retirement certificates, for example) or in a pension fund. With the exception of retirement certificates, these products must be redeemed through a periodic annuity system, with an annual limit of 7.5% of the total invested.


Do you want to buy another property or land

If you reinvest the amount from the sale of your own permanent home in the purchase of another home for the same purpose, you are exempt from paying capital gains. The same applies if you use the money to buy a building plot or invest in the extension or improvement of another property.  But be careful: you have to do this within 24 months of the transaction (which includes situations where the purchase of the new home took place before the sale of the current one) or within 36 months of the deal taking place. It is also important to bear in mind that the amount must be reinvested in full. Otherwise, the exemption will be partial, being proportional to the amount of the sale that is applied. For example, if only 70% of the sale price is reinvested, the capital gains exemption will also correspond to 70%.

The new home, which must be for your own permanent residence, can be located in Portugal, in another European Union country or in the European Economic Area, and it is mandatory to share tax information with these destinations.


You want to repay your mortgage

One option under the Mais Habitação (More Housing) program is to exempt from paying capital gains those who decide to use the amount from the sale of a property belonging to any member of the household to repay their mortgage within three months. The loan may be for their own home or that of their descendants. This measure, already approved by the government, applies to transactions carried out between the beginning of 2023 and the end of 2024. It should also be borne in mind that if the amount obtained is greater than what is needed to pay off the loan, the remainder will be taxed by the IRS.





Source: Montepio
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