Selling a house after age 65: how to be exempt from capital gains.

Selling the family home in retirement age can mean substantial profit, but also a scary tax bill. However, Portuguese law provides a special exemption for those over 65 years old.

The tax on the sale of real estate

When a property owner sells a property for a value higher than the purchase price, the positive difference generates a capital gain. In Portugal, the general rule determines that half of this profit should be added to the taxpayer's annual income and subject to taxation in the IRS. In a scenario of a high financial profit from the sale, the amount to be paid in taxes can be substantial.

Exemption for individuals over 65 years old

Current legislation provides for a tax exclusion regime focused on taxpayers in the retirement phase. To access this exemption, specific criteria must be met at the time of sale. The property sold must correspond to the taxpayer's own and permanent residence. In addition, the owner or spouse must be 65 years old or in retirement due to old age. The last legal requirement applies when the capital resulting from the sale is reinvested.  

Rules of application of capital

Tax exemption requires that the profit from the alienation be reinvested in a financial retirement product within a maximum period of six months after the deed. The taxpayer can choose either an Open Pension Fund, a Financial Branch Life Insurance, the Public Capitalization Regime, or a Pan-European Individual Retirement Product.

By reinvesting the full amount of the sale value deducted from the amortization of any housing loan, the citizen acquires the right to total exemption from IRS on the capital gain.

Investment redemption limits.

The law allows the capital invested in these products to be mobilized gradually. The holder can withdraw annually up to a limit of 7.5% of the amount invested, receiving that amount in monthly, quarterly, or annual installments. In an investment of 200,000 euros, for example, it is possible to withdraw up to 15,000 euros per year.

Exceeding this annual redemption limit results in immediate loss of the granted tax benefit.