How to sell a property without paying an income tax?

The sale of a real estate before the lapse of 5 years since its purchase, used to be associated with the obligation to pay the personal income tax in the amount of 19%, calculated on the increase in the value of the real estate.

The condition for exemption from this obligation was to spend the funds obtained from the sale for the implementation of own housing purposes within 2 years from the end of the tax year in which the real estate was sold. At the moment, the amendment extends this period to 3 years, and moreover, it`s allowed to take advantage of the tax exemption in additional cases.

New rules introduced for inheritors of real estate, are much more favorable than before the entry of the current regulations. Pursuant to the new rules, the 5-year period after which the inheritor is released from the obligation to pay income tax when selling the inherited property is to be counted from the date of purchase of the property by the testator. To put it simply, if the testator has acquired real estate min. 5 years before the property was awarded to an heir, the heir may sell the property immediately after inheriting it, without paying any income tax.

So far, the 5-year period had to be counted from the date of the testator’s death. Thanks to the introduced change, in most cases heirs will be able to sell the real estate without paying income tax.

The new rules are also more favorable to property sellers who are widowed and divorced. Persons with this status will be able to sell the property without income tax within 5 years from the date of its acquisition to the joint property. Until now, 5 years had to be counted from the date of the spouse’s death or division of the joint property after divorce.

The new rules apply to the revenues earned after January 1st, 2019. Therefore, the moment of sale of the property is crucial, not the date of its purchase. The change applies to all sellers who decide to sell the property after December 31, 2018.