From Old to Gold: A Guide to Claiming Tax Refund on Selling Your Home for a New One
As your family expands or you stumble upon a new home that steals your heart away, the longing to sell your old house and embrace a fresh start becomes irresistible. But did you know that this exciting transition can also bring unexpected cost savings in the form of potential tax refunds? Many individuals remain unaware of the financial advantages that await them, contingent upon meeting specific criteria and fulfilling certain conditions. In this enlightening blog post, PropertyScout unveils the insider secrets of leveraging tax benefits when selling your old house and embarking on the journey towards your dream home.
The Qualifications of a Tax Refund Applicant
Scenario 1
Having a Name Registered in the Old House for at Least 1 Year
Scenario 2
If your name is registered in the old house for less than a year, but you meet the requirement of having your name registered in the new house for at least one year (including the day of selling the old house), special considerations come into play, especially in the case of marital property. In such cases, either the husband's or wife's name must be registered in the house for a minimum of one year. Notably, the calculation of the income tax refund will be based on the house with the lower price*, as outlined in the announcement made by the Director-General of the Revenue Department on Income Tax, Version 125."
Tax Calculation Example
To provide a clearer understanding, let's take a look at an example of tax calculation from selling a house, where the new house has a higher price than the old house, and the old house has a higher price point than the new house.
Example 1: Tax calculation if the new house is more expensive than the old house
Let's say you sell an old house for 5 million baht and purchase a new house for 7 million baht. Let's assume that the assessed value and selling price are the same. You have owned the house being sold for 2 years, with your name registered in the house for more than 1 year. The income tax deducted at the source from the house sale can be calculated as follows:
| Assessed Value | 5,000,000 baht |
| Deducting Incidental Expenses (Owned for 2 years, eligible for 84% deduction) | 4,200,000 baht |
| Remaining Balance | 800,000 baht |
| Divide by the number of years owned (800,000 baht / 2 years) | 400,000 baht |
| Calculate the tax*: (300,000 x 5%) + (100,000 x 10%) | 25,000 baht |
| Income Tax Deducted (Tax x Years Owned = 25,000 baht x 2 years) | 50,000 baht |
In this case, to meet the conditions, you must have your name registered in the house being sold for more than 1 year and sell the old house to purchase a new one within 1 year. You are eligible to claim a tax refund deducted at the source of 50,000 baht.
Example 2: Tax calculation if the new house is cheaper than the old house
Let's say you sell an old house for 5 million baht and purchase a new house for 3 million baht, assuming the assessed value and selling price are the same, and you have owned the house being sold for 2 years with your name registered in the house for more than 1 year, in this case, the income tax deducted at the source that is eligible for a refund will be calculated based on the house with a lower price, which is the new house priced at 3 million baht, as follows:
| Assessed Value | 3,000,000 baht |
| Deducting Incidental Expenses (Owned for 2 years, eligible for 84% deduction) | 2,520,000 baht |
| Remaining Balance | 480,000 baht |
| Divide by the number of years owned (480,000 baht / 2 years) | 240,000 baht |
| Calculate the tax*: (240,000 x 5%) | 12,000 baht |
| Income Tax Deducted (Tax x Years Owned = 12,000 baht x 2 years) | 24,000 baht |
In the case of selling an old house to purchase a new house with a lower price point, you can request a tax refund deducted at the source of 24,000 baht.
In summary, if the new house has a higher price point than the old house, you can claim a full tax refund deducted at the source (based on the example of selling the old house for 5 million baht to purchase a new house for 7 million baht, resulting in a tax refund of 50,000 baht). However, if the old house has a higher price point than the new house, you can claim a partial tax refund deducted at the source (based on the example of selling the old house for 5 million baht to purchase a new house for 3 million baht, resulting in a tax refund of 24,000 baht).
*Calculating Tax from Net Income (Progressive Scale)
- Net income not exceeding 150,000 THB: Exempted from tax payment.
- Net income from 150,001-300,000 THB (5%): 7,500 THB minimum.
- Net income from 300,001-500,000 THB (10%): 7,500-27,500 THB.
- Net income from 500,001-750,000 THB (15%): 27,500-65,000 THB.
- Net income from 750,001-1,000,000 THB (20%): 65,000-115,000 THB.
- Net income from 1,000,001-2,000,000 THB (25%): 115,000-365,000 THB.
- Net income from 2,000,001-5,000,000 THB (30%): 365,000-1,265,000 THB.
- Net income over 5,000,000 THB (35%): Over 1,265,000 THB.
Required Documents
To claim a tax refund from selling a house, the seller must first pay the income tax deducted at the source to the Land Department. After that, they can submit the refund request to the Revenue Department by filling out Form P.N.D.10 at the local tax office, along with these supporting documents:
- Receipt of income tax payment issued by the Land Department.
- Copy of the original property sales agreement.
- Copy of the new property sales agreement.
- Copy of the house registration of the income earner for the new property (in case the name has been registered in the old house for less than 1 year).
Taxes/Fees to be Paid When Selling a House
- Withholding Income Tax
- Either Specific Business Tax or Stamp Duty
- Transfer Fee of 2%, depending on the agreement between the buyer and the seller.
Closing Comments
If you're considering selling your old house to purchase a new one, it's important not to overlook the opportunity to claim income tax refunds from the house sale. By meeting the specified criteria, you can significantly save on your expenses. Moreover, before finalizing your decision to buy a new house, it's crucial to stay updated on the prevailing home loan interest rates. This will enable you to make an informed borrowing decision and ensure a smooth financial journey. Remember, being well-informed and proactive can make a significant difference in your overall savings and financial planning.
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