Individuals with Capital Gains:
If you have made capital gains that exceed the annual exemption limit, you need to report this on an Income Tax return. Individuals who make a capital gain are required to submit an income tax return if the total gain exceeds the annual exemption amount, which is currently €1,270 for an individual in 2024. The gain is subject to Capital Gains Tax (CGT), which is typically 33% on the profit made from selling an asset.
When submitting an income tax return, individuals may be able to claim certain deductions or reliefs that can reduce the taxable amount of the capital gain. Some common deductions and reliefs that may apply to include:
- Costs of Acquisition (Purchase Costs)
The original cost of the asset, including:
- Purchase price
- Associated costs such as legal fees, auctioneer’s fees, and stamp duty incurred at the time of acquisition.
- Costs of Disposal (Selling Costs)
The costs directly associated with selling the asset, include:
- Solicitor or auctioneer fees
- Advertising costs
- Any professional fees paid to facilitate the sale
- Improvements to the Asset
The cost of improvements made to the asset during the period of ownership can also be deducted, including:
- Renovation or enhancement costs
- Substantial repairs or improvements that increase the value of the asset
- Relief for Principal Private Residence (PPR Relief)
If the asset is a property that has been used as your principal private residence for the duration of your ownership, you may be eligible for Principal Private Residence Relief. This relief can potentially exempt the entire capital gain from CGT, provided the property was your main residence for the period it was owned. However, if the property was only partially your main residence, relief may be pro-rated based on the time you lived in the property.
- Entrepreneur Relief
If the capital gain arises from the disposal of qualifying business assets, Entrepreneur Relief may apply. This reduces the rate of CGT from the standard 33% to 10%, subject to certain conditions. To qualify, the individual must have owned the assets for at least 3 years and be actively involved in the business.
- Retirement Relief
If the gain arises from the disposal of a business, Retirement Relief may be available. This relief is available for individuals aged 55 or older, and it may reduce or eliminate the CGT on the sale of certain business assets, subject to meeting specific conditions.
- Capital Losses
If you have incurred capital losses in previous years or in the same year, these can be offset against capital gains. Losses can be carried forward to offset future gains, potentially reducing your overall tax liability.
- Annual Exemption
As mentioned earlier, there is an annual exemption for capital gains of up to €1,270 (in 2024). This amount is automatically deducted from the total capital gain before CGT is applied. Only gains exceeding this exemption are taxed.
- Other Specific Reliefs
There are other more specific reliefs that might apply, such as CGT relief for certain family transfers or other niche scenarios. These can be more complex, and individuals should consult a tax professional for detailed advice on eligibility.
How Capital Gains Tax Applies to an Individual in Ireland
Capital Gains Tax (CGT) applies to individuals in Ireland who sell or dispose of assets, such as property, shares, or other investments, and make a profit above the annual exemption limit of €1,270 (for 2024). The standard CGT rate is 33%, applied to the net gain after allowable deductions, such as acquisition costs, selling expenses, and certain reliefs like Principal Private Residence Relief or Entrepreneur Relief. Individuals must report taxable gains through an income tax return and ensure all documentation supporting deductions and reliefs is maintained for compliance
Conclusion
When submitting an income tax return for capital gains in Ireland, it’s important to ensure that all relevant costs and reliefs are accounted for to reduce the taxable gain. You should keep records of acquisition, sale, and improvement costs, and be aware of the various reliefs such as Principal Private Residence Relief, Entrepreneur Relief, and Retirement Relief.