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Capital gains from the sale of property: How do I know if I am exempt?

It is known that there are several charges associated with buying and selling a house and it is important to be aware of all the procedures. If you have a home available on the market, are you aware of the added value from the sale of the property?

Follow us as we explain what capital gains consist of, how they apply and which cases allow exemption.


What are the capital gains from the sale of property?


When a property is placed on the market, it is expected that the sale price will be higher than the sale price purchase, in order to generate a profitable business. As people say, the capital gains from the sale of property correspond to the value of the profit from the transaction.

In the vast majority of cases, this is taxable income in the IRS. It is mandatory to declare the sale of a home to the Tax Authority through annexes G and/or G1, in order to calculate the capital gains from the sale of the property.

It is essential to highlight that there are several elements that enter into the calculation of the payment of capital gains. Let’s get to know them.


How are capital gains applied?


The calculation of capital gains from the sale of property consists of the difference between the sale price and the purchase price (adjusted to the annual monetary update coefficient), subtracting the valuation charges of the property, as well as expenses related to the purchase and sale.

Capital gains generate payment in IRS. Normally, only 50% of the calculation value is subject to IRS. However, certain cases of properties that benefit from public support are subject to 100% taxation.

What expenses can be deducted from the payment of capital gains from the sale of property?
– Improvement works in the last 12 months;
– Fixed equipment;
– Energetic certificate;
– Real estate agency commission;
– Solicitor;
– City tax;
– Stamp tax;
– Notary and land registration costs.

It should be noted that, in order to be effective, these expenses must be duly recorded and proven.

The IRS payment is considered in combination, that is, the capital gains are added to the remaining income for the year. This will be used to determine the taxable income (gross income, minus deductions and allowances) and the IRS tax bracket. Specifically for capital gains from the sale of property, it will determine the rate to be applied to the taxable percentage, This rate varies between 14.5% and 53%.


Is it possible to be exempt from paying capital gains?


If you meet one of these requirements, you are exempt from obligations resulting from the capital gains from the sale of the property:
– The house was purchased before 1989 or the land for construction was acquired before June 9, 1965;
– The value from the sale of the house permanent will be reinvested in the purchase of a new home for the same purpose (24 months before or 36 months after the transaction);
– You are over 65 years old or retired and the value of the sale of the housing own and permanent will be invested in life insurance (or life insurance, such as a Retirement Savings Plan), in a pension fund or in retirement certificates (in the 6 months following the deal);
– Within the scope of the Mais Habitação program, and only for sales in 2023 and 2024, it is exempt if the transaction value is applied to the amortization of the credit for housing your own permanent home (within 3 months).

The exemption is total if you reinvest the entire sale value in one of the cases mentioned. If you apply part of the value, the exemption is partial, equivalent to the amount reinvested.

It is essential not to forget that you must always declare the sale of a propertywhen filling out your IRS declaration, regardless of whether or not you are exempt from paying capital gains from the sale of property.


What if the calculation results in a loss?


If the sale value of the property is lower than the purchase price, it is a situation of loss of value. Although you do not have to make IRS payments, the declaration still applies. The sale must be reported within 5 years.


Be informed and prepared


It is beneficial to plan the costs related to the eventual change of ownership of your property, whether through sale, living donation or inheritance. Although the capital gains from the sale of property are not a big deal, they are a complex topic that requires attention to detail. Therefore, we advise you to analyze everything with a specialist.


To discover more useful tips and advice in the real estate field, as well as in other areas of mediation, visit our blog. At DECISÕES E SOLUÇÕES, we provide you with an excellent service, from practical content to expert support.




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