Selling a home to supplement your retirement income: how does capital gains tax relief work?

Who can qualify?

This option covers the sale of a main residence and requires the seller, their spouse or their unmarried partner to be demonstrably retired or at least 65 years old on the date of the sale. The law therefore allows someone who retired before the age of 65 to qualify. Portuguese Tax and Customs Authority (AT), case 26447.

Before making calculations, gather the documents relating to the use of the home, retirement status and property ownership. Check each owner's position where there are several sellers.

How much must you reinvest?

The reference is the sale proceeds, less the repayment of the loan taken out to acquire the property. It is not simply the profit made. Eligible reinvestment in another main residence can also be deducted, allowing the amount to be split between a new home and this option. CIRS, Article 10(10).

In a hypothetical example, a sale for €300,000 with repayment of €40,000 of the acquisition loan leaves a reference amount of €260,000. Investing €200,000 in an eligible product would correspond to approximately 76.9% reinvestment. Provided the conditions are met, that would be the proportion of the capital gain excluded; the remaining 23.1% would follow the applicable tax rules. This percentage is not a tax rate. Decree-Law No. 97/2026, Article 5: CIRS, paragraph 12.

Estimating the capital gain and tax

For an initial estimate, use the Doutor Finanças property capital gains calculator. Check that the available options match your circumstances. The result depends on the data entered and does not, by itself, confirm compliance with the legal conditions for exclusion from taxation.

Check whether the tool lets you specify retirement status or age, the reinvestment option and the amount invested. The compliance of the financial product's contract requires a separate check.

Where can you invest the money, and by when?

The law allows one or more of the following options:

• A financial life insurance contract.
• Individual membership of an open pension fund.
• A contribution to the public capitalisation scheme.
• A Pan-European Personal Pension Product, known as a PEPP.

The reinvestment must take place within six months after the sale. The intention and amount, even if only partial, must be included in the Portuguese personal income tax (IRS) return for the year of disposal. CIRS, Article 10(10).

The 7.5% is not a promised return

For the financial life insurance contracts and open pension funds covered by the scheme, the contract must provide exclusively for regular payments over at least ten years, with an annual maximum of 7.5% of the amount invested. AT, case 26447.

For an investment of €200,000, that limit represents €15,000 a year, equivalent to €1,250 a month if the payments were spread equally across all twelve months. It is a cap on distributions: the payments may include repayment of the capital itself. It does not mean earning 7.5% interest or receiving that amount net of costs and taxes.

Request a projection that separates capital repaid, investment income, charges and the remaining balance. Compare it with your expected expenses and the money you will need to keep available for unexpected events.

Is any Portuguese retirement savings plan (PPR) suitable?

No. A product's commercial name does not establish its eligibility. In a ruling issued in August 2026, the Madeira Tax and Customs Authority (AT-RAM) considered the PPR under review ineligible because its contractual terms did not adequately incorporate the requirements of this scheme. A general warning about losing the relief was not considered sufficient. AT, case 26447.

Before signing up, ask for the general and specific terms and a written explanation of their suitability for reinvestment of the sale proceeds. Ask:

• Is the capital guaranteed? By whom and under what conditions?
• What are the entry, management and payment charges?
• How much will I receive, how often and for how long?
• What happens to the balance on death?
• What are the consequences of exceptional withdrawals or changes to the payments?

Plan your decision before signing the deed

Keep the deed, evidence of loan repayment, the product contract, proof of investment and payment records. Missing the deadline, exceeding the annual limit or interrupting the payments may cause the relief to be lost, with taxation in the year specified by law. CIRS, Article 10(11).

Start with the budget for your move: housing, works, regular expenses and an available reserve. Then compare the tax saving with the product's costs and commitments. To organise the sequence of transactions, also see selling a home to buy another.

The examples are illustrative; the treatment depends on the facts and documents of each transaction.