Capital gains tax on home sales: how to calculate

Selling a home you owned, a tenant-owner apartment or a small house, for more than you once paid, you make a profit. That profit is called reavinst, more formally capital gain, and it is taxed. It is one of the bigger costs in a home deal, and an item many discover late. Calculating it in advance saves nasty surprises when the tax return is due.

The good news is the maths is basically simple. Take what you sold for, subtract what you bought for, subtract what you spent improving the home and the costs of buying and selling. What remains is your profit. And it is that, not the whole sale price, you pay tax on. The rest of the guide goes through each part.

What is reavinst, and what is taxed?

Reavinst is the gap between what you sell the home for and what it altogether cost you to own and fix up. Never the sale price itself that is taxed. Selling a flat for 4 million bought for 3 million, it is not the 4 million taxed: it is the profit of roughly 1 million, after deductions.

The basic formula looks like this: sale price minus purchase price minus improvement expenses minus agent fee and other selling expenses. What you land on is your taxable profit. Selling expenses include, for example, the agent’s fee, home-staging and listing costs, and any pre-sale survey. Buying a tenant-owner apartment, the initial contribution and any allocation fees also count into your purchase price.

The tax rate: why it lands around 22 percent

Here it gets a little tricky, so take it calmly. On private homes, not the whole profit is taxed. Only 22/30 of the profit is taxable, and on that part you then pay 30 percent capital tax. Adding it up, the effective tax on the profit is roughly 22 percent (22/30 × 30 percent = 22 percent).

In practice you can therefore count on a simpler rule of thumb: roughly 22 percent of your profit goes to tax. A 1-million-kronor profit thus means around 220,000 kronor in tax. Technically you declare 22/30 of the million, about 733,000 kronor, and pay 30 percent on that amount, but the result is the same. Good to know both ways of seeing it, since the forms start from the 22/30 split while most people day to day think in terms of 22 percent. On a page of its own we answer straight how much capital gains tax is.

Deductible improvements: new, extension and rebuild

One of the most important things you can do to cut tax is tracking your improvement expenses. Skatteverket separates two kinds of work on the home, and only one type lowers your profit. The basic picture: new builds, extensions and rebuilds are fully deductible, while repairs and maintenance are treated differently with stricter rules.

Basic improvements are things that did not exist before, or were made clearly better than original condition. Extending the house, fitting out the attic, adding an extra bathroom, or installing ground-source heat where only direct electricity existed before. Those expenses are as a rule fully deductible, whatever year they happened, as long as they altogether exceeded 5,000 kronor during the year.

Repairs and maintenance (repainting, swapping a worn kitchen for an equivalent, or fixing an existing roof) are as a rule not deductible the same way. The exception is improving repairs: swapping, say, an old basic kitchen for one of clearly higher standard, you may deduct the part matching the improvement, and only if the work happened during the sale year or the five preceding years. Always save receipts, invoices and photos. Without records you get no deduction, however sure you are the work happened.

Profit or loss, and what a loss is worth

Sometimes you sell at a loss, for less than the home cost you after deductions. Then of course no capital gains tax. Instead you claim a deduction in the tax return, but only half the loss is deductible. Of a 100,000-kronor loss you thus deduct 50,000 against other capital income, for example interest, dividends or gains from other sales.

The deduction gives a tax reduction, usually 30 percent of the deductible amount up to a certain limit. Of the deductible 50,000 in the example, the reduction is thus around 15,000 kronor. It does not outweigh the loss, but it softens it. The point is a loss is not something you just take. It belongs in the tax return for you to benefit.

A worked example from start to finish

Say you bought a tenant-owner apartment for 3,000,000 kronor and sell it for 4,200,000. Meanwhile you had an extra bathroom built for 250,000 kronor, a clear rebuild that is deductible. Selling, you pay 105,000 kronor in agent fee and 15,000 for home staging and listing.

Then the maths: 4,200,000 minus 3,000,000 purchase price, minus 250,000 improvement expense, minus 120,000 selling expenses. Left is an 830,000-kronor profit. Tax is roughly 22 percent of that, so about 182,600 kronor. Technically you declare 22/30 of 830,000, around 608,700 kronor, and pay 30 percent on it. Same final figure. Note how much the bathroom and selling expenses cut the profit: without those deductions profit would have been 1,200,000 kronor with tax over 80,000 higher.

Next step: can you postpone the tax?

Working out reavinst is step one. Step two is considering whether you must pay the tax at once. Buying a new permanent home with the sale, you can in many cases request deferral (uppskov) and postpone all or parts of the capital gains tax, which we go through in a guide of its own. Deferral is nowadays interest-free, making it far more attractive than just a few years ago.

Much of your profit’s size, and thus the tax, is decided already when you buy. Buying the right home at the right price from the start, you stand stronger all the way. On SökHem we turn ordinary searching around: instead of chasing listings you place a buying brief with your requirements and budget, and the matching actively looks for fitting sellers, even ones who have not listed publicly yet. Tax rules change over time, so always check current amounts and percentages with Skatteverket ahead of your own deal.