Capital gains tax: Possible exemptions

WHAT ABOUT EMPTY HOUSING?

What happens if the home has been occupied as a primary residence until it is put up for sale, but at the time of transfer it is empty? The exemption applies as long as a reasonable period of time has elapsed between your move and the transfer. The tax administration assesses situations on a case-by-case basis.

A delay of one year is always tolerated

Beyond that, account may be taken of the characteristics of the property, its price, the situation of the real estate market without any maximum timeframe being fixed in advance. The State Council ruled that a property sold almost 22 months after it was put up for sale could benefit from the exemption (CE n ° 356328 of 07/05/2014).

But beware of a long sale due to a high starting price

In one case, the tax administration questioned the benefit of the capital gain exemption. The couple had moved 28 months before the sale. In evidence, it was shown that the couple had entrusted a mandate to a real estate agency for a price of 490,000 €, then given two other mandates to agencies and a notarial office and published a sale advert on the Internet. In the absence of a buyer, the sellers lowered the price periodically to 425,000 €, 374,000 €, 361,850 € and then finally the house sold for 287,240 €. According to the tax authorities, an examination of sales during the period concerned showed that the prices per square meter varied between € 897 and € 1,561. The applicants' property had sold at € 1,613 per square meter, a price close to the estimate contested by them. For the tax authorities, the couple did not justify having completed the necessary due diligence to put their house up for sale. The excessively high price therefore avoided the exemption (CAA Nancy, n ° 17NC02194, of 04/11/2019).

Sale after several years due to a claim is accepted

The tax administration has in fact specified, when it was recently questioned by a taxpayer, that in the event of a claim that made the housing unsanitary, the sale could take place late and still benefit from the exemption (Bofip Instruction of 03/12/2020 - Rescript). In this case, the owner's main residence had been destroyed by an explosion followed by fire, rendering the property uninhabitable. The sale took place several years later, once the property had been rebuilt.

WHEN A COUPLE SEPARATES

In the event of a divorce, the time before the sale can be considerably lengthened. Imagine that you separate and your ex-spouse continues to live in the accommodation that was your main residence. Several years after your departure, you finally put the property up for sale. Are you exempt from capital gains tax? Yes, says the tax authorities if the property was occupied by your ex-spouse until it was put up for sale and the transfer takes place within the normal sale deadlines (one year from the date of the sale). However, there is no time limit between the date of your separation and the sale of the property. It also does not matter whether you have become the owner of a new main residence in the meantime (Min. Rep., JOAN of 03/26/2013, no. 13927). Finally, if, in the process of divorce, you sell a home under construction, you also benefit from the exemption if you demonstrate that this property was intended to become your main residence and that your spouse and yourself were not the owner of the accommodation you occupied during the work (BOI-RFPI-PVI-10-40-10 of 19/12/2018).

ENTERING A RETIREMENT HOME

Elderly people accommodated in retirement homes may be exempt from capital gains on the sale of their former main residence. Three conditions must be met:

The sale must take place within two years of entering the retirement establishment (the date of signing of the notarial deed is used);

The person must not be subject to real estate wealth tax in the penultimate year preceding that of the sale (i.e. - in 2018 for a sale in 2020). And, for a sale made this year, their tax income for 2019 must be less than € 25,839 if he/she is single (€ 36,628 for a couple);

Finally, the old accommodation must have been left vacant. Only tolerance: occupation by a member of the ‘tax’ household or by the partner.

FIRST TRANSFER OF A HOME

During the first transfer of a home (second home, rental investment), you can benefit from an exemption from capital gains on two conditions. You must not own your primary residence (and not have owned it for the past 4 years) and agree to reuse the sale price in the purchase or construction of a primary residence within 2 years.

SALE NOT EXCEEDING € 15,000

Other special situations give rise to the right to the tax advantage, such as the sale of real estate where the transfer value does not exceed € 15,000 (parking, garage or joint ownership shares, for example). If the property is owned by a married couple each of whom owns a 50% share, the sale is exempt if the sale price is not greater than € 30,000.

PROPERTY HELD FOR OVER 30 YEARS

Other real estate and in particular second homes, rental accommodation and land are subject to tax. From 5 years of holding, the capital gain is adusted. The latter has the effect of reducing taxation or even eliminating it completely if the property has been held for more than 30 years. More specifically, between 23 and 30, the gain escapes income tax but not social security contributions. To know precisely the reduction for the applicable holding period, please refer to the table below.

ABATEMENTS OVER TIME

Worth knowng! When the real estate capital gain is taxed, taxation is applied on the gain, that is to say on the difference between the sale price and the purchase price (plus acquisition costs, works, etc. ). The flat tax rate is 36.2% (19% for income tax and 17.2% for social security contributions). If the gain is greater than € 50,000 (excluding building land), a surcharge of 2 to 6% applies.