How to Avoid Capital Gains on Home Sales for Those Over 65 or Retired
A legal provision in Portugal allows homeowners who are retired or over the age of 65 to be fully exempt from paying capital gains tax on the sale of their home. This little-known solution can result in savings of tens or even hundreds of thousands of euros in personal income tax (IRS). The rule provides an alternative for those who do not plan to purchase another home after selling their primary residence.
The mechanism for this exemption requires the homeowner to apply the proceeds from the sale, either in full or in part, into a financial life insurance policy or a pension fund that makes regular payments. This reinvestment must be completed within six months following the date of the property sale. By adhering to these conditions, the profit generated from the sale of a primary and permanent residence is not subject to taxation. This is a crucial topic covered in our regulatory and legal frameworks blog.
Eligibility for this tax benefit is specific. The individual must either be receiving a state pension or be over 65 years old. The property sold must be classified as their primary and permanent residence ('habitação própria e permanente'). It is essential to identify the correct financial products that qualify for this reinvestment. Seeking professional advice is crucial to ensure all legal requirements are met and the benefit is secured. For assistance, property owners should connect with accountants specializing in property tax.
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This tax exemption provides a significant financial planning advantage for seniors in Portugal, allowing them to access the equity in their homes without a large tax burden. The process requires careful timing and selection of appropriate financial instruments. For anyone in this situation, understanding the specific steps and deadlines is paramount to successfully claiming the exemption. Further guidance on navigating the legalities of property transactions can be found by consulting with real estate lawyers.
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