Apartment sales tax: when to pay and how to reduce

When you don't need to pay tax on the sale of an apartment

You do not need to pay taxes or even file a tax return if you have owned a home for more than a certain period. So, it is enough for the property to be owned for 3 years, or 36 full months if you:

purchased it before January 1, 2016;
received as a gift from close relatives: parents, children, grandparents, grandchildren, brothers and sisters;
privatized it;
received as an inheritance or under a contract of lifelong maintenance with dependents.

If all these statements are not about you, then in order not to pay taxes, you need to own an apartment or house for 5 years, or 60 full months.

Changes to the tax code will come into effect on January 1, 2020. Without paying taxes, after 3 years of ownership, it will be possible to sell the housing that you received in a way not indicated in the list above. But only on condition that you have the only one. If you own another apartment or a share in it, the minimum tenure is 5 years.

If you are a Muscovite, received housing under the renovation program and decided to sell it, then the years of ownership of both apartments, both new and vacated, are counted.

When you need to pay tax on the sale of an apartment

Those who owned real estate for less than the period prescribed by law must declare the earnings received and pay tax on personal income from it - 13%.

If you bought an apartment before January 1, 2016, the tax is calculated based on the amount specified in the purchase and sale agreement. If after, then you will have to compare which is higher: the price from the contract or the cadastral value multiplied by a reduction factor of 0, 7. This measure was introduced so that the owners would not be tempted to prescribe a low price in the purchase and sale agreement and hide part of the income.

The authorities of the constituent entities of the Russian Federation can independently reduce the decreasing coefficients or the minimum terms of ownership of real estate down to zero. This eases the tax burden on residents of the region when selling housing or exempts them from it.

To pay tax, you need to file a 3 ‑ NDFL declaration with the tax office by April 30, next to the year of sale of the apartment. In it, you indicate all the income for the previous year, including the profit from the sale of the apartment. Tax must be paid by July 15th.

How to reduce the tax on the sale of an apartment

The tax seems monstrously huge. But it can be legally reduced - down to zero.

1. Reduce the amount of income by the amount of expenses

You sold the apartment and received money for it, but this does not mean that the entire amount is income. Before that, you bought this property and, most likely, spent a lot on it. This amount can be used to reduce the profit that is subject to personal income tax.

For example, you sold an apartment for 3 million, which you bought 2 years ago for 2.8 million. Under the contract of purchase and sale, personal income tax would have amounted to 390 thousand. But if you declare expenses, then only the difference of 200 thousand will be taxed. Accordingly, only 26 thousand will have to be paid.

If you sell an apartment for the same amount as you bought, then there is no income and you do not need to pay tax on it. But you still have to submit a declaration to document your right to exemption from payments.

2. Get a tax deduction

If you did not have purchase expenses, for example, you inherited an apartment, you can take advantage of the tax deduction. When selling an apartment, house, room or share in them, it is 1 million rubles.

Let's say you sold your home for 2.3 million and must pay the state 299 thousand rubles. The deduction will reduce the amount that is taxed to 1.3 million, and the contribution will be reduced to 169 thousand.

If the apartment costs less than a million, then you won't have to pay anything at all. So in cases with inexpensive real estate, it is better not to reduce the amount of income by the amount of expenses, but to take advantage of the deduction. Moreover, the law allows you to receive it once a year.

What to remember

Income from the sale of an apartment is subject to personal income tax at the rate of 13%.
Contributions can legally be reduced to zero if income is reduced by the amount of expenses or a tax deduction is obtained.
If you own real estate for more than a certain period, you do not have to pay tax or file a tax return.