Capital Gains Simulator: how much IRS you could pay when selling your house in Portugal

The Capital Gains Simulator estimates the IRS (Portuguese personal income tax) you may have to pay on the gain from selling a property in Portugal. It starts from the sale price and the updated purchase value, then subtracts the deductible expenses. It also takes into account the exemption for reinvesting in another habitação própria e permanente (your main, permanent home).

Use it before you set your asking price or accept an offer, so you know how much of the gain could go in tax. The result is a simulation. The amount you will actually pay is calculated by the Autoridade Tributária (the Portuguese tax authority), based on the IRS return you file in the year after the sale.

If you don't yet know what your property could sell for, the free estimate gives you a first price reference. To see what you keep once the agent's commission, the mortgage and the other selling costs are paid, look at what's left after the sale.

When to run the simulator before you sell

The best time to run a simulation is before you sign anything. Once the CPCV (contrato-promessa de compra e venda, the promissory contract) is signed, the price and the date of the escritura (the public deed of sale) are agreed. From then on, there is little you can change.

Before you set your asking price

Many owners treat the deed price as the money they will receive. It isn't. The estate agent's commission and any mortgage still outstanding come out of it. If there is a capital gain, so does the following year's IRS (personal income tax).

Picture two neighbours selling identical flats at the same price. One bought many years ago, for very little. The other bought recently, close to today's value. The first may face a heavy tax bill and the second almost none, even though both are asking the same price.

Run the simulation with the price you have in mind, then again with a slightly lower figure, the one you might accept after negotiation. If you are not yet sure what price is realistic, start with the free valuation. For the other costs of selling, read how much it costs to sell a property, cost by cost.

When comparing offers, or deciding whether to sell now or wait

Two offers at different prices leave a smaller gap after tax than you might expect. The extra euros in the higher offer also count towards the capital gain. Simulate both and compare what you keep at the end, not the headline price.

The date of the escritura matters too. It decides which tax year the gain falls into and which coefficient is used to update your purchase price. A sale completed in January rather than December can land on a different tax return, alongside different income.

Waiting may bring a higher price, but also a larger gain. The simulator does not forecast the market: it only shows the tax effect of each scenario you enter. To check whether an offer is in line with the market, see I've received an offer for my property: is it fair?.

If you are buying another permanent home

Reinvestment is what changes the result most. So run three cases: reinvesting everything, reinvesting only part, and reinvesting nothing. You will see how much each euro you put into the new home is worth in tax terms.

Before you run the simulation, answer these questions:

• Is the property you are selling really your tax address and the place you actually live?
• Will the new property also be your permanent home?
• How much of the sale price will go towards paying off the mortgage?
• Will the new purchase fall within the deadlines set by law?

The order in which you sell, repay the loan and buy has tax and banking consequences. It is explained in Selling a property with a mortgage. Check the reinvestment conditions on the Portal das Finanças before you sign for the new purchase.

Before you hunt for purchase and renovation paperwork

Every expense you can prove reduces the capital gain. But tracking down old invoices takes time, especially if you bought long ago or have moved since. The simulator helps you decide where the search is worth the effort.

1. Run a first simulation with just the purchase price and the sale price.
2. Add a rough figure for the expenses you remember: the IMT (imposto municipal sobre as transmissões onerosas de imóveis, the property transfer tax) and deed costs when you bought, renovation work, the sale commission.
3. Compare the two results.
4. If the difference is large, look first for the documents behind the biggest expenses. If it is small, don't spend days going through old files.

For the purchase deed and the other papers the buyer and the notary will ask for, use the list of documents needed to sell a property.

How to read the figure in your result

Capital gain, taxable portion and tax: three different figures

The capital gain is your profit on the sale. It is the sale price minus the inflation-adjusted purchase price and the expenses the law allows you to deduct. This figure is not yet a tax bill. It only shows how much you made in the eyes of the tax authority (Finanças).

The taxable portion is the share of that gain that goes into your IRS (Portuguese personal income tax). For a resident, only half of the gain on a property counts, under article 43 of the IRS Code. If the simulator shows a gain of €80,000, the taxable portion is €40,000.

The estimated tax is what that taxable portion adds to your IRS for the year of the sale. This is the figure that matters for your budget. It is also the least certain of the three, because it depends on information you will only have when you file your return.

Why the IRS rate you entered changes the result so much

The taxable portion is added to your salary, pension, rental income and any other income for the year. IRS rates are progressive. A large gain can therefore push your income into a higher band and raise your average rate.

The simulator uses the rate you typed in. Many people copy the rate from their last tax assessment (nota de liquidação). That works if the year of the sale looks like the previous one. If you have retired, changed jobs or stopped receiving rent, your real rate may be different.

Before relying on the figure, answer these questions:

• Will my income this year be similar to last year's?
• Will I file my IRS jointly with my spouse or separately?
• Is the property mine alone, or does it have other owners, such as a spouse or heirs? If so, each owner declares their own share of the gain.
• Am I tax resident in Portugal in the year of the sale? Different rules apply if you live abroad: see selling a property as a non-resident.

If in doubt, run two simulations, one with your current rate and one with a higher rate. The gap between the two results shows you the risk you are taking.

A zero or negative result: what it means and what it does not guarantee

A result of zero or below means that, with the data you entered, the sale price does not exceed what the property cost you. This is called a capital loss. It happens, for example, with properties bought near a price peak, or after major works backed by invoices.

This result does not exempt you from declaring the sale. Selling a property must appear on the following year's IRS return, whether there is a gain, no gain or an exemption. Even with a loss, the capital gains annex has to be filled in.

Nor does it guarantee that the tax authority will reach the same figure. In some cases the final amount can differ:

• Works without invoices in your name are not accepted, even if they were carried out.
• If the tax value (valor patrimonial tributário, shown on the caderneta predial, the property's record at the tax office) is higher than the price in the deed (escritura), the tax authority can use that value as the sale price.
• A purchase price copied wrongly, without the buying costs or with the wrong date, changes the result completely.

Keep the purchase deed, the receipts for IMT (the transfer tax paid when you bought) and the invoices for any works. These documents back up the simulator's result if the tax authority asks questions.

From the tax bill to the money you keep

Capital gains tax is not paid on the day of the deed. It is settled with your IRS assessment the following year. Many months can pass between the sale and that assessment, and it is easy to spend money that is already spoken for.

For the full picture, add the estimated tax to the other costs of the sale: the mortgage to repay, the agency commission and the certificates. The simulator for what you keep after the sale does that sum. The guide on how much it costs to sell a property in Portugal explains each cost, and the guide on selling a property with a mortgage sets out the order of steps with the bank.

The sale price is the figure that weighs most on the result. If you do not yet know what your property is worth, a price picked at random gives a tax figure that is just as random. Start with the free estimate. It gives a ballpark figure based on market data, but it is not a bank valuation or a certified valuation.

What pushes the tax bill up or down

Two sales at the same price can lead to very different tax bills. The taxable amount depends on your starting value, the expenses you can prove and your personal situation. These are the factors that change the result most.

When you bought the property and how it came to you

A property bought many years ago usually has a low acquisition value. The gap with the sale price is wider, but the official update of that old value can cancel out part of the gain.

A purchase, an inheritance and a gift do not start from the same acquisition value. For a purchase, it is the price stated in the escritura (the final deed of sale). For an inheritance or a gift, it is the value used for Imposto do Selo (stamp duty), often the valor patrimonial tributário (the taxable value recorded by the tax office) rather than the market value.

This is where many heirs get caught out. If the taxable value is low, the gain looks huge, even when the property has barely risen in value. Before selling an inherited property, check the value recorded in the stamp duty file. For more detail, see valuing an inherited property and valuation before a gift.

Improvement works, invoiced and within the time limit

Works that add value to the property can be added to the acquisition cost. They must have been carried out within the period set by law and be backed by invoices showing your tax number.

A new kitchen, a refitted bathroom, replacing every window or a licensed extension usually count. Painting walls, changing a tap or fixing a roller shutter is maintenance and does not.

• Keep the original invoices and proof of payment.
• Always ask for an invoice in your name; a quote or an informal receipt will not do.
• If the works needed a licence, keep the licence or the notice filed with the Câmara Municipal (the municipality).
• Keep improvement works apart from routine repairs, year by year.

Works paid in cash without an invoice do not lower the tax. If the tax office checks your return, only documented costs count.

Selling costs you can prove

Some costs linked to the sale also reduce the gain. The estate agent's commission is usually the largest. The energy certificate, which you need before advertising, counts too.

The rule is the same as for works: only costs invoiced in your name are accepted. If someone else paid the commission, or the invoice was issued to a company, the deduction is at risk. The guide how much it costs to sell a property in Portugal lists these costs one by one.

Tax residence and the number of owners

Being resident or non-resident in Portugal changes how the gain is taxed. The rules for non-residents have changed in recent years and each case has its own details. If you live abroad, check your position on the Portal das Finanças and read the page on selling while living outside Portugal.

When a property has two owners, the gain is split according to each one's share. Each owner declares their part in their own IRS (Portuguese income tax) return. Since their other income differs, the final tax can differ between them.

A married couple can also choose between joint and separate taxation. The choice changes the tax band applied, and so the amount due. Run both options before filing the return.

Partial reinvestment and your mortgage

When you sell your permanent home and buy another, the exemption is in proportion to the amount reinvested. If you reinvest only part of it, the rest of the gain is still taxed.

A mortgage paid off with the sale proceeds is part of this calculation. Money that goes to the bank is not treated as available for reinvestment. So the amount to reinvest for a full exemption is the sale price minus the loan repaid.

1. Example: you sell for €300,000 and repay €100,000 of mortgage on the day of the deed.
2. For a full exemption, you would need to reinvest €200,000 in another permanent home.
3. If you reinvest €150,000, only the matching share of the gain is exempt; the rest is taxed.

The time limits for reinvesting and the duty to live in the new home are set by law and checked by the tax office. The order of selling, repaying and buying is explained in the guide selling a property with a mortgage.

What the simulation cannot tell you, and when to get advice

The simulator gives an indicative estimate. It shows you the rough size of the tax bill before you put your property on the market or accept an offer. The final figure is only known when the Autoridade Tributária (the Portuguese tax authority) assesses your IRS (personal income tax) for the year of the sale, taking in all your income for that year.

Nor does the simulation replace an accountant. A lot of money may be at stake, or you may be torn between selling this year and next. In those cases, talking to someone who knows your tax position can save you a nasty surprise when the tax assessment arrives.

Situations the simulator handles poorly

The simulator was built for the most common case. Someone buys a property, lives in it or lets it, and sells it later on. Outside that path the rules change, and the result can mislead you.

• Inherited property divided between heirs. The acquisition value is not what your parents paid. It is the value used for the imposto do selo (stamp duty) on the inheritance. When one heir pays the others compensation (tornas) to keep the property, each share can have its own acquisition date and value. See also the page on valuing property as part of an inheritance.
• Mixed use. Part of the property may have served as an office or consulting room for a declared professional activity. That part may fall under the rules for business income rather than those for private capital gains.
• Alojamento local (registered short-term holiday letting). A property used for registered alojamento local is tied to that business activity (category B of IRS). Moving the property into the activity, and later back into your personal assets, has tax effects of its own that the simulator does not reproduce.
• Sale to a family member. The declared price may be lower than the VPT (valor patrimonial tributário, the tax value shown on the caderneta predial, the property's tax record). If so, the tax office can use the VPT as the sale price. A friendly price can therefore lead to more tax than you expected. If the plan is to pass the property to a son or daughter, compare it with a gift.

The documents that give you the right figures

A simulation is only as reliable as the numbers you put into it. A figure from memory, along the lines of "I paid roughly…", gives a rough result. Gather your paperwork before you make any decision.

1. The escritura (purchase deed), with the exact date and the value declared at purchase.
2. Proof of payment of the IMT (property transfer tax) and the imposto do selo paid when you bought.
3. Invoices for building work, issued with your NIF (tax number) and the property's address. A quote or a receipt without your NIF is unlikely to be accepted.
4. Invoices linked to the sale, such as the estate agent's commission and the energy certificate.
5. If you plan to reinvest, a statement from your bank showing the loan balance outstanding on the day of the sale.

These amounts go on annex G of the IRS return for the year after the sale, filed on the Portal das Finanças. These are the documents the tax office can ask you for to back up each figure. Keep them together, with the deed of sale. For every cost of selling, one by one, read how much it costs to sell a property.

Run the figures with a believable sale price

The sale price carries more weight in the result than any other number. Before you sell, it is also the least certain. If you enter the price you would like rather than what buyers actually pay, the forecast tax comes out too high and so do your sums.

Start from a realistic market value for your property. The free estimate gives you a reference based on market data and comparable properties in your area. It is neither a bank valuation nor a certified valuation, but it is enough to run the simulation with a plausible price.

Run several simulations: at the estimated value, a little below and a little above. That way you see how much the tax moves as the price is negotiated. If you already have an offer on the table, use that figure and check whether the offer is fair.

Frequently asked questions about capital gains when selling a property in Portugal