To maximise the sale price of your principal residence, it may be a good idea to detach part of your garden and sell it separately as building land. While this may seem a financially attractive option, it is important to find out beforehand about capital gains tax, which could make the operation unattractive.
In addition to the planning and legal issues that need to be considered in advance, tax considerations should not be ignored before embarking on such a transaction.
Capital gains tax, which is deducted from the sale price, can have a significant impact on the seller's finances. This tax amounts to 36.2% (including social security contributions) on the difference between the cost price and the sale price. However, there are a number of adjustments, a system of allowances and exemptions.
The most common exemption is for the sale of a principal residence. This exemption also applies to the immediate and necessary outbuildings of the exempted residence, provided that they form an indivisible whole with it and are therefore sold at the same time as the residence.
It is therefore legitimate to ask whether it is possible to benefit from this exemption in the event of the simultaneous sale of one's main residence and part of the garden sold as building land?
Unfortunately, the answer is no. The garden sold as building land will not be exempt.
According to the tax authorities, when a property is sold as building land, i.e. when it is a plot of land on which buildings may be authorised under town planning documents (CGI, art. 257, I-2-1°), the immediate and necessary outbuildings only include :
- premises and parking areas used by the owner as annexes to their home (garage, car park, shed, caretaker's cottage) ;
- courtyards, passageways and, in general, all land used as access to the dwelling and its annexes.
If the land sold consists of a garden and a courtyard, the price should be broken down to calculate the capital gain on the garden part only.
Before the sale, those suffering from administrative phobia may wish to enlarge the courtyard, build a shed or make a parking space in place of the garden in order to benefit from the exemption... But beware, fraus omnia corrumpit!
