Selling your house before 5 years: what does it involve?

Have you bought a home less than 5 years ago and are thinking of selling it? Before proceeding, it is important to understand the tax implications of this decision. Selling a property within 5 years of purchase is possible, but you need to carefully consider the tax implications, as various situations may arise.

Find out in this guide what happens if you sell your home before 5 years, how to avoid penalties, and what exceptions are provided for by law.

Can you sell a house before 5 years?

Yes, it is possible to sell a property purchased less than 5 years ago. However, you need to pay attention to:

• Any first-time home buyer benefits you may have taken advantage of
• Capital gains tax
• Deadlines for a possible new purchase

When do you lose your first-time home buyer benefits?

If you bought your main residence with the tax benefits provided for a “first home” and decide to sell it before 5 years, you may be required to repay the taxes saved, plus a 30% penalty and related interest, with one exception.

You do not lose the benefits if, within 12 months of the sale, you purchase another property to use as your main residence, or land on which to build a new home (again, to be used as your primary residence within one year).

Capital gains tax: when is it payable?

If you sell your home before 5 years and make a profit (i.e., you sell at a higher price than you bought it for), you are required to pay a 26% tax on the capital gain.

You do not pay capital gains tax if the property has been used as your main residence for most of the time between purchase and sale.

Practical example

Imagine you bought your first home with subsidies three years ago. Now you decide to sell it without buying a new first home within 12 months.

Here are the items you will need to consider:

• Pay the difference in tax saved
• A surcharge equal to 30% of the unpaid taxes on the property, except for the possibility of self-reporting and voluntary correction
• Capital gains tax (26%) if the property was not used as a primary residence
• Any legal expenses

How can you avoid penalties if you sell your home before 5 years?

If you purchased a home with first-time buyer benefits and decide to sell it before 5 years, you can avoid losing the benefit if:

• You purchase another home within one year, designating it as your primary residence
• You purchase land on which to build a home to be used as your primary residence, again within one year

In these cases:

• You retain the first-time homebuyer benefits
• You do not pay penalties
• You pay capital gains tax only if the property has not been used as your primary residence

Please note: a personalized assessment is required

Selling your home before five years can be a legitimate choice, but also risky if not accompanied by proper tax planning. Before proceeding, it is advisable to consult with an expert advisor. If you want to start assessing the feasibility of the transaction, the first step is to know the value of your home.