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Offset your investment losses against capital gains

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I am sitting on an unrealised loss on an investment property purchased at the height of the boom. I am also sitting on unrealised profits on a portfolio of shares.

If I were to sell the property and realise the loss, can I then set the loss against realised profits on my shares? If so, is there any time limit on my using up the tax losses on the property?

Mr D.McC., Dublin

Capital losses remain a stark reality for many people who were invested in the boom years, and not just in property. Many Irish investors are also still nursing losses against their shareholdings in Irish banks.

The good news, if you can call it that, is that there is provision to offset losses against gains in order to reduce your tax bill.

The important thing is to make sure that both transactions take place in the same year – or at least that the profits are not booked (and taxed) in a prior tax year.

You haven’t given figures but, just for illustration, let’s assume you have a €10,000 profit on your shares and that your investment property is currently worth €40,000 less than you paid for it at the peak of the market.

If you sell both the shares and the property in the 2018 tax year, your €10,000 gain on the shares will be more than offset by the loss on the sale of the property.

Other assets

So what happens to that remaining capital loss? Well, you hold on to it and set it against any other capital gain you make this year from the sale of any other assets.

If it is not fully offset by the end of the year, you carry it forward to offset against gains next year and beyond. There is no time limit on this. The loss remains outstanding until you have made sufficient capital gain to full offset the €40,000 loss on your property investment.

Of course, the key thing is that you do have to sell the property to crystallise the loss and make it allowable against capital gains. Many people will hold on to their under-water property in the hope that the current rising market will bring it back into the black. And it might.

There’s nothing wrong with them doing that but, unless they physically sell the property, the gain on the shares will become liable to capital gains tax at 33 per cent – apart from the first €1,270 of any gain in one year which is exempt from tax.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

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