When reselling a property, the seller may hope to realize a capital gain, meaning to resell the housing at a higher price than its purchase price. In the case of second homes, the capital gain is taxable. However, certain conditions allow for exemption from this tax.
Understanding Real Estate Capital Gains
We speak of real estate capital gains when the seller obtains a sale price higher than the amount they invested at the time of purchase. The seller can realize a capital gain due to a positive evolution of real estate market prices or thanks to the improvement of their property, for example, in case of renovation.
The capital gain on a second residence is calculated in two steps:
- First, we calculate the gross capital gain, that is, the difference between the sale price and the acquisition price.
- Secondly, we define the amount of tax on the capital gain by applying the reduction related to the duration of ownership of the property.
Tax on the Capital Gain of a Second Residence
The regime applied to the capital gain varies depending on the sale price, the nature of your property, and the duration of ownership. Since September 1, 2013, the capital gain is taxed at the current flat rate of 19% for income tax (with a linear reduction of 6% from the 6th year) and for social levies at the current rate of 15.5% (with a progressive reduction starting from the 6th year).
If you decide to sell your property less than six years after its purchase, no reduction on the gross capital gain, if any, will be applicable.
Beyond this period, the amount of tax will vary depending on the duration of ownership. Note that after 22 years, as an owner, the real estate capital gain is exempt from income tax. The years of ownership are counted from the anniversary day of the acquisition of the property, that is, the date of purchase, donation, or death in case of inheritance.
To be completely exempted from the capital gain realized on the sale of a second residence, three conditions must be met:
- It must be the first sale of a second residence.
- The seller must not have been the owner of their main residence, directly or indirectly, during the four years preceding the sale.
- The seller must reinvest the sale amount in the acquisition or construction of a dwelling within 24 months following the sale.
Specialized in the transaction of second residences, our team is at your disposal to answer your questions and assist you in buying or selling your property in Les Gets resort.
