The tax does not apply to the total price at which you sold your house. The state taxes only the net profit that the owner obtained from the transaction. In a very simplified way, the Tax Authority subtracts the original purchase value from the current selling price.

In this equation, there are two factors favorable to the taxpayer. First, the State uses a currency devaluation coefficient to update the old purchase price in the face of inflation. In addition, the seller can deduct essential expenses to lower the taxable profit.

The invoices for improvement works carried out in the last 12 years, the cost of the energy certificate, and the amount paid to the real estate agency are deducted directly from the final calculation.

Tax collection in the annual income tax return

After calculating the actual net profit, the tax invoice comes into play. In Portugal, the rule states that only half of the real estate profit is subject to taxation. This means that 50% of that amount will be added to your salary and the remaining annual income in your IRS statement.

The final value resulting from this sum will determine your new IRS bracket. As real estate transactions involve very high amounts, it is common for taxpayers to jump to the higher brackets in the year they sell the property, generating tax bills that can reach tens of thousands of euros.

Total exemption through reinvestment

One way to avoid payment of this bill is to use the exemption for reinvestment. To ensure this tax benefit, the sold house must correspond to your official address, in other words, your Permanent Residence.

If you sell your main residence, the law grants you 36 months to apply the money from the sale to the purchase, construction, or rehabilitation of a new house. This new property will also have to serve as your new main residence.

If you decide to reinvest only a part of the profit, the tax exemption will be directly proportional to the invested capital.

The exclusive benefit for retirement age.

Portuguese legislation protects the older citizens' heritage through a quite generous tax exemption. If the owner or spouse is over 65, they can avoid paying tax on the sale of the family home, even without buying a new property.

To ensure this advantage, it is necessary to channel the profit from the sale into a financial product focused on a pension supplement. Life insurance, an open pension fund, or the public capitalization regime are valid choices.

The money needs to enter the fund within a maximum period of 6 months after signing the public deed, and the holder starts receiving a monthly supplement to their retirement.

Do you want to free up your budget monthly without selling your property?

Grouping your credits is the best strategy to gain immediate liquidity at home.

With the help of Poupança no Minuto experts, consolidating all your installments into a single low monthly payment can reduce financial burdens by up to 60%.

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