New rule only covers sales from 2026
Anyone who sold their main residence in 2025 is excluded from the new IRS exemption regime for
capital gains, even if they reinvest part of the proceeds in a rental property in 2026.
The Tax Authority (AT) clarified, in a binding ruling, that the new regime only applies to transfers carried out between 1 January 2026 and 31 December 2029. Therefore, the date of the sale is decisive in determining whether the capital gains can benefit from the tax exemption.
Reinvestment has specific requirements
The new regime allows certain gains to be excluded from taxation when the proceeds from the sale of a home are reinvested in the purchase of a property intended for residential letting, within the rental limits established by law.
The reinvestment can take place between 24 months before and 36 months after the sale. The intention to reinvest must also be declared in the IRS return for the year in which the transfer took place.
To retain the tax benefit, a residential tenancy agreement must be signed within the legally established rental limits and within the applicable deadline. The property acquired through the reinvestment must also remain on the rental market for at least 36 months, consecutively or intermittently, during the first five years.
Sale date determines eligibility
In the case analysed by the AT, the taxpayer sold their main residence in 2025 and intended to use part of the proceeds received in 2026 to purchase an apartment for residential letting.
Although the reinvestment would take place while the new rule was already in force, the AT considers that the capital gains arose from the transfer carried out in 2025. Therefore, the relevant date for determining whether the regime applies is the date of the sale, not the date on which the reinvestment is made.
Capital gains from 2025 are excluded
Decree-Law No. 97/2026 establishes that the new rules take effect from 1 January 2026 and cover transfers carried out until 31 December 2029.
As a result, a home sold in 2025 cannot benefit from this tax exemption through a subsequent reinvestment. The AT concluded that, in this case, the capital gains do not meet the timing requirements established under the new regime.
Where the reinvestment is only partial, the tax exemption may also be proportional to the amount actually reinvested, provided that the other conditions set out in the IRS Code are met.
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