Buying and selling your private or family home typically is not taxable. However some are looking to purchase a family home with the intention of reselling it in time, and a few earn their income this way – buying and selling.
If you have established a pattern of purchasing and then selling your “family home,” this could be considered as property speculation or dealing for tax purposes.
So, how do you know whether you are considered a property speculator, dealer or investor? Click here for the IRD definition
Things to consider in answering the above question:
- what was your intention when you bought the property?
- what pattern have you established in terms of property transactions?
- are you (and if so, how) associated with a developer, builder or property dealer?
- will the Bright-line Test* apply?
- will you be affected by rezoning?
How do you know if selling your home will be taxable? Think carefully about the answers to these five questions.
“Ok, so I just have to hold onto a property for a really long time and then I’m not considered a dealer?” No. The amount of time you hold the property is immaterial. It’s your intention at the time of acquisition.If you bought a property with the intention of reselling it, then any capital gain that you make on the sale taxable.
“Right-o. So, is there some sort of level? That is, my first couple of properties are tax-free and then I pay tax after that?” Ahhh… no. Again, it’s intention, patterns and associations – not numbers of properties sold.
“Great. It looks like I will have to pay tax then. How do I figure that out?” The IRD have a great resource here – or you can contact us.