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Capital gains tax on residence

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Newbie

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I am a freelance journalist and work from home. For a couple of years I claimed my business expenses as tax deductions. (I've since stopped, my income is lower these days, and it was barely worth the trouble.) If I sell my home, will I have to pay capital gains tax on the profit, which will be substantial - possibly $2m? If I do have to pay CGT, would it have to be calculated on the same proportion of the home I used to claim expenses? If I sell the house in, say, five years do I still have to pay the CGT? Thank you.

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Taxicorn

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@caroegan 

 

Yes as you were running a business from your home.

 

It will be calculated as:

(1) The number of days running a business / total number of days property owned multiplied by

(2) Area of home used in business / total area of home multiplied by

(3) The market value of the home when first used as a business.

 

Doesn't matter how long you live there it will not cancel out any Capital Gains tax for you.

 

 

 

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Best answer

Taxicorn

Replies 3

@caroegan 

 

Yes as you were running a business from your home.

 

It will be calculated as:

(1) The number of days running a business / total number of days property owned multiplied by

(2) Area of home used in business / total area of home multiplied by

(3) The market value of the home when first used as a business.

 

Doesn't matter how long you live there it will not cancel out any Capital Gains tax for you.

 

 

 

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Newbie

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Thanks for that @macfanboy . For point 3, do you mean the capital gain, which is the selling price minus the price on the date you first used it as a business?

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Taxicorn

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@caroegan 

 

Yes sorry (3)  it's selling price - market value when first used as a business.

 

I believe that you have to use the Market Value from the first time only.

 

 

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Newbie

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And another question I have is, if I started one business, then had a year or two when I didn't have a business in the home, and then started another, can I use the average of the start date prices to determine the start date for CGT? Thanks. Very grateful for your wisdom here.