Bright Line Test Update

Key Bright-line test updates for Property Owners:

Bright-line Property Rule Changes (Starting July 1, 2024):

Important Changes to the Bright-line Property Rule Effective July 1, 2024

From July 1, 2024, new regulations regarding the bright-line property rule will be in effect. Here’s what property owners need to know:

1. Bright-line Rule Changes:

   • Starting July 1, 2024: If you sell a property within 2 years of purchase, the bright-line rule applies.
   • Before July 1, 2024: Existing rules remain in effect:
     • Properties bought between March 29, 2018, and March 26, 2021: Subject to the rule if sold within 5 years.
     • Properties bought on or after March 27, 2021: Subject to the rule if sold within 5 years for new builds, or within 10 years for other residential properties.
   • Main Home Exemption: Generally, selling your main home is exempt from the rule, provided specific criteria are met.

2. Rollover Relief for Related Parties:

   • New rules will exempt certain property transfers between related parties from the bright-line rules. This is crucial when transferring property within families or business relationships.

3. Interest Limitation Rules:

   • Since October 1, 2021: Limits on claiming interest as a deduction for residential property have been in place.
     • For properties bought after March 27, 2021, interest deductions are restricted unless an exception applies.
     • For properties purchased before March 27, 2021, a decreasing percentage of interest can be claimed as an expense over time.
     • No interest deductions are allowed for new loans taken out on or after March 27, 2021, starting October 1, 2021.
   • Starting April 1, 2024: Claiming interest as an expense for residential property will gradually be reintroduced.
     
     

Stay updated with these important changes to ensure compliance and optimal financial planning. For detailed information, consult a property tax specialist or visit the Inland Revenue website.