How to reduce CGT liability?
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daryle
Apprentice
Joined: 11 Dec 2005
Posts: 7
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 Posted: 02/27/08 - 06:52 Post subject: |
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| Good day! I inherited a house five years ago from my parents and now I intend to sell it. I lived in this house for five years with my wife and two sons. Because my job's being transferred to another city we are forced to move there and sell our house. I was told that sale will result in a substantial Capital Gains Tax. Will I have to pay any taxes when I sell it? If there are any taxes to be paid, are there any ways to reduce it? Thank you in advance. |
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stephi
Apprentice
Joined: 22 Dec 2007
Posts: 5
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| Posted: 03/27/08 - 22:49 Post subject: |
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| If you inherited the house five years ago you will be in obligation to pay Capital Gains Tax if you sell your house in next two years. I say two years because there is a "7 year rule" which can exclude you from paying any Capital Gains Tax. "7 year rule" states that if you inherited the house and used it as your main residence for seven years, and after that period of time you decide to sell it, you will have no Capital Gains Tax liability at all. If you sell it before this period of time, you must pay the tax. There are also some another ways to reduce your CGT liability. One of them is to gift your spouse half of the property. Everyone is entitled to have certain amount of Capital Gains every year without paying CGT. By giving your spouse a half of property, every one of you will have tax relief of certain amount of money. My advice would be that you wait for two years and then sell the house. In this case you will be able to use "7 year rule", and be completely free of paying taxes. |
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