In this article you will find all the information you need to get no penalty for selling a first home before 5 years. (pardon the pun).
Why can't I sell my house before 5 years?
Many support this argument as they fear having to pay a Capital gain in the sale of the first home It is actually wrong to say that one cannot sell a property within 5 years of its purchase. A law providing for this would be illegitimate, as it would deprive a citizen of the freedom to dispose of his property. Selling a property within 5 years of its purchase can be done safely, but it is good to know all aspects of this transaction. The state has regulated this type of buying and selling because, the resale of a property immediately after purchase could conceal a speculative operation (buying to resell at a higher price and thus make a profit) that would generate an untaxed profit.
So here's the mystery solved: to sell your home within 5 years of its purchase, all you need to do is to be aware of the consequences you are facing, and do the calculations well.
There are multiple variables to consider.... let's see them together:
The sale of a first home before 5 years
First home benefits are an incentive that the legislature has granted to citizens with certain characteristics to facilitate the purchase of a property. It is clear that if you benefit from a benefit designed to help you buy the home, the state does not look favorably on reselling it for speculative purposes. This is why the notary, when you buy a first home, always tells you that if you resell it within the 5 years, the IRS (sooner or later) will come and ask you for the difference in tax you did not pay when you bought it + any extras or charges. (we are talking about 7% of the cadastral value, which is not little).
How to avoid the forfeiture of these benefits?
During one's lifetime, it may happen that one may have to change one's home in a short period of time, for a thousand reasons. Not everyone is a real estate speculator, and the state knows this, so it has provided for the possibility of not incurring a refund of what was benefited if in the 12 months following the sale of the first home one buys another property for the same purpose, benefiting again from taxes as a first home.
Selling a "second home" before 5 years
Okay Alexander, but if I bought a "second home" and now find myself in the condition of having to resell it before 5 years, what do I do? Here, the state does not provide protections since those who own a second home may be considered "well-off" and not in need of benefits.
There are 2 cases:
- Sell the house at a higher price than you bought it for by creating a PLUSVALUE.
- Sell the house at the same price as it cost you or at a lower price.
In the first case, your gain will be subject to your IRPEF rate on your tax return in the year following the sale of the property, or alternatively you can opt to pay the notary (tax substitute for contractors) 26 percent of the capital gain generated to be paid to the state at the same time as the sale is signed.
In the second case, no tax will need to be paid since the tax authorities in Italy do not tax losses.
However, there is a situation in which you do not pay tax on the capital gain regardless of the type of (residential) property you are going to sell.
That is, in case of sale of the MAIN HABITATION.
Difference between first home and main home
Be very careful:
the primary residence 99% of the time is a first home -- but it doesn't have to be that way.
The principal residence is that property in which you prove (by bills, residence or otherwise) that you (the owner or family members) have lived for more than half of the time for which you have owned the property. In this case(Art 67 Law No.917/1986), you do not need to pay capital gains tax.
Of course, there are a thousand facets to this transaction. Before putting a house up for sale, consult with a professional in the field and do the math carefully! In the next articles you will find more information related to this type of sale.
If you need advice on buying or selling your property, or need to sell your home before 5 years, contact me!
