Selling a Half-Share of an Inherited Family Home: Understanding Tax Implications in Ireland

Inherited Property Sale: Understanding capital Gains Tax Implications

A homeowner is facing potential tax liabilities after agreeing to sell a share of a property inherited from their father. The situation, stemming from an estate settled in 2018, demonstrates a common confusion regarding capital gains tax versus capital acquisitions tax-often referred to as inheritance or gift tax.

The Inheritance Scenario

The individual, who served as the sole executor of their father’s estate, received a fifty percent share of a family home. The property was initially valued at €90,000 in 2018 during the probate process. Now,with a significantly increased property market,the current valuation stands around €200,000. Their sister intends to purchase the homeowner’s share, potentially resulting in a gross gain of €100,000.

Capital Gains, Not Inheritance Tax

Initially, the homeowner questioned whether they would owe Capital Acquisitions Tax (CAT) on the gain. However, experts clarify that the initial inheritance itself was likely tax-free, falling under the parent-to-child Category A tax-free threshold, which was €310,000 in 2017 and has since risen to €400,000. The subsequent sale to the sister triggers Capital Gains Tax (CGT), not CAT. Both taxes currently carry a standard rate of 33 percent, but their application differs considerably.

Calculating the Capital Gains Tax Liability

Capital Gains Tax is calculated on the difference between the asset’s acquisition value and its disposal value. In this instance, the homeowner acquired their share for €45,000 (half of the €90,000 valuation in 2018) and is now selling it for €100,000. This yields a gain of €55,000. However, a small annual tax-free exemption of €1,270 applies, reducing the taxable gain. Expenses related to the inheritance and sale, as well as qualifying improvements to the property, can further reduce the taxable amount.

Without any deductions, the potential Capital Gains Tax liability would be approximately €17,731, calculated as (€55,000 – €1,270) x 33/100.

Why The Category B Threshold Doesn’t apply

The homeowner initially inquired about utilizing the Category B threshold-a tax-free allowance for gifts and inheritances between close relatives. However, this threshold is irrelevant in a straightforward sale, even between siblings. It only becomes applicable if the sister were to pay more than the fair market value for the share, essentially creating a disguised gift.

Key Tax Differences: A Rapid Reference

Tax Type	Trigger	Applicable To	Tax-Free Threshold
capital Acquisitions Tax (CAT)	Inheritance or Gift	Inherited Assets & Gifts	€400,000 (Category A: Parent to Child)
Capital Gains Tax (CGT)	Sale of an Asset	Investment Properties & Assets	€1,270 Annual Exemption

Did You Know? The annual Capital Gains Tax exemption of €1,270 has remained largely unchanged for decades, a point of criticism given inflation and rising asset values.

The Importance of Valuation

Experts strongly advise obtaining a professional, formal valuation of the property before proceeding with the sale. This serves as a crucial record to defend the agreed-upon price against potential scrutiny from the Revenue Commissioners. The cost of the valuation itself is typically deductible from the capital gain.

Pro Tip: Maintaining detailed records of all expenses related to the property-from initial probate costs to any improvements made-can maximize potential tax savings.

While Capital Gains Tax is self-assessed, a solid valuation provides peace of mind and minimizes the risk of future complications.

Looking Ahead: Long-Term Property Tax Considerations

The Irish property market continues to evolve, with ongoing discussions about potential tax reforms. Staying informed about the latest changes to Capital Gains Tax and Capital Acquisitions Tax is crucial for anyone involved in property transactions. Regularly review your tax position with a qualified professional to ensure compliance and optimize your financial outcomes.

Frequently Asked Questions About Inherited Property & Tax

• What is Capital Gains Tax? Capital Gains Tax is a tax on the profit made from selling an asset, such as a property, that has increased in value.
• How does Capital Acquisitions Tax differ from Capital Gains Tax? Capital Acquisitions Tax applies to inheritances and gifts, while Capital Gains Tax applies to the sale of assets.
• can I deduct expenses from my Capital Gains tax liability? yes, certain expenses related to the asset, such as probate fees and qualifying improvements, can be deducted.
• what is the current annual Capital Gains Tax exemption? The current annual exemption is €1,270.
• Is a formal property valuation necessary when selling an inherited property? While not legally required, it is highly recommended to support the sale price and avoid scrutiny from Revenue.

do you find this information helpful in understanding your tax obligations when selling inherited property? What othre financial questions do you have regarding estate planning and property ownership?

What documentation is essential too accurately determine the date of valuation for CGT purposes?

Capital Gains Tax (CGT) on the Sale of Inherited Property

When you inherit a property in Ireland,you acquire it at its market value on the date of death of the previous owner – this is known as the ‘date of valuation’. Selling a portion of that inherited property, like a half-share, triggers potential capital Gains Tax (CGT) liabilities. Understanding these implications is crucial for maximizing your returns and ensuring compliance with Revenue regulations. This article focuses specifically on selling a half-share, but the principles apply proportionally to any partial sale.

Determining Your Capital Gain

Your capital gain isn’t simply the sale price minus what you paid. It’s the sale price minus the original value at the date of death, plus any allowable expenses. Here’s a breakdown:

1. Date of Valuation: Establish the market value of the entire property on the date the previous owner passed away. A professional valuation is highly recommended for accurate documentation.
2. Apportioned Cost: Calculate your cost based on your half-share. If the property was valued at €300,000 on the date of death, your apportioned cost is €150,000.
3. Allowable Expenses: Deduct allowable expenses from the sale proceeds. These can include:

Solicitor’s fees

Estate agent’s fees

Advertising costs

valuation fees

costs of improvements (not routine maintenance) – with proper documentation.

1. Capital Gain Calculation: Sale Price (Half-Share) – (Apportioned Cost + Allowable Expenses) = Capital Gain.

Example: You sell your half-share for €175,000. your apportioned cost is €150,000, and your allowable expenses total €5,000. Your capital gain is €175,000 – (€150,000 + €5,000) = €20,000.

CGT Rate and Annual Exemption

Currently (September 2025), the CGT rate in Ireland is 33%. However, you benefit from an annual CGT exemption.

Annual Exemption: For a single individual, the annual CGT exemption is €1,000. For married couples/civil partners,it’s €2,000 (if filing separately,each can claim €1,000).

Applying the Exemption: In our previous example, a single individual could offset the €1,000 exemption, reducing the taxable gain to €19,000. The CGT due would then be €19,000 x 33% = €6,270.

principal Private Residence (PPR) Relief – A complex Area

PPR relief can substantially reduce or eliminate CGT, but its application to inherited property, and especially a partial sale, is complex.

Qualifying Conditions: To qualify, the property must have been your only or main home for the period of ownership. This is where it gets tricky with inherited property.

Inheritance & PPR: If the previous owner lived in the property as their PPR, some of that PPR relief may be transferable to you, but only for the period they qualified. The rules are intricate and depend on the specific circumstances.

Partial Sale & PPR: Applying PPR to a half-share sale is particularly challenging. Revenue will likely assess the proportion of the property that qualified for PPR and apply the relief accordingly. Professional tax advice is essential here.

Tax Reporting and Payment Obligations

You are legally obligated to report the sale to revenue within 60 days of the completion date. This is done through the Revenue Online Service (ROS).

Form CG1: You’ll need to complete Form CG1, detailing the sale, your costs, and your capital gain.

Payment: CGT must be paid by the specified deadline. Failure to do so can result in penalties and interest charges.

ROS Registration: If you aren’t already registered for ROS, you’ll need to do so.

Specific Scenarios & Considerations

Multiple Beneficiaries: If the property was inherited by multiple beneficiaries, each individual is responsible for reporting and paying CGT on their respective share of the sale.

Joint Ownership Before Inheritance: If the deceased jointly owned the property,the CGT implications are more complex and require careful consideration of their ownership share.

Improvements vs. Repairs: Distinguishing between capital improvements (which add value and are deductible) and routine repairs (which are not) is vital. Keep detailed records of all expenses.

Non-Resident Beneficiaries: Different rules apply to beneficiaries who are not tax residents of Ireland.

Practical Tips for Minimizing Tax Liability

**Professional