Capital Gains Tax on the Sale of a Home

Under the Income Tax Law, gains individuals make from disposing of a property they acquired within five years are taxed as 'capital gains' (değer artış kazancı). For sales made after the five years have passed, this tax does not apply, as long as the sale isn't part of a commercial activity.

How is the gain calculated?

1. The sale price is determined (the actual price declared on the title deed).
2. The purchase (cost) price is determined; expenses such as the title deed fee paid at purchase can be added to the cost.
3. If the increase in the domestic producer price index (Yİ-ÜFE) from the purchase date to the sale date exceeds the threshold set by law, the cost price can be updated through indexation.
4. The (indexed) cost is subtracted from the sale price; after deducting the exemption amount set each year, the remaining portion is taxable.

Example (simplified)

Say a home is bought for 3,000,000 TL and sold three years later for 5,000,000 TL. If the cost after indexation comes to 4,200,000 TL, the gain is 800,000 TL. That year's exemption amount is deducted from this figure, and the remainder is taxed, together with other income, at progressive income tax rates.

When to file

Capital gains are declared in the annual income tax return filed in March of the year following the sale.

Cases outside the scope

• As a rule, the sale of an inherited property doesn't generate capital gains tax.
• The sale of property held for more than five years (when it isn't a commercial activity).
• Cases where the sale price comes in below the cost (a loss).