Tax on gift from parents?

Gaz

Hi,
Could someone clarify what the tax implications are on a cash gift from parents ? Looking at the revenue site it suggests it is tax free up to €225000, although a different section says its €3000.

If a parent gave, say €25000 towards a house deposit, would you be liable ?
How do the banks view this ?

Thanks

Mint Sauce

Gaz wrote: »

Hi,
Could someone clarify what the tax implications are on a cash gift from parents ? Looking at the revenue site it suggests it is tax free up to €225000, although a different section says its €3000.

If a parent gave, say €25000 towards a house deposit, would you be liable ?
How do the banks view this ?

Thanks

You would not be liable. As long as it was in writting to the bank, that it was a gift, and not a loan, and that they had no financial interest in the property, the bank woukd accept it as part of the deposit amount towards a mortgage.

Icepick

all explained here

The_Conductor

No- you're not liable.

Essentially- a child is entitled to inherit 225k from their parents over the course of the child's life time- tax free (ante or post mortem- aka during their parent's life or gifted to them in a will after their passing).

Your 225k limit is reduced to 200k by the gift of 25k.

There is no need to make a declaration of Revenue (by either the child or the parent) until the sum of all parental gifts totals or exceeds 150k (in cumulative).

As the lumpsum is not from savings, the bank will require a binding declaration from the parents, that the lumpsum is a 'gift' and is not expected to be repaid- and that the parents have no call on the property.

Separate to all of this- there is an annual stipend that parents can gift children- of 3k per parent (i.e. 6k per annum to each child)- which doesn't impact on anything whatsoever. The 3k per parent per annum to a child- does have to be declared to Revenue- but does not generate a tax liability to either party.

We have several threads in this forum discussing this- normally around budget time- as it has changed a few times in recent years- the most recent change being the 3k per annum per parent (i.e. 6k) which can be disbursed to children tax free. This is known as the 'small gift exemption' (though 6k is quite a reasonable lumpsum to most people)- and was most recently revised in last year's budget.

The 225k lifetime limit for tax free inheritance- has trended downwards and is less than half what it once was. Various lobby groups are pressurising the Minister to reduce this further- as a tax raising measure- though its not thought its going to be further reduced.

The_Conductor

The_Conductor wrote: »

Separate to all of this- there is an annual stipend that parents can gift children- of 3k per parent (i.e. 6k per annum to each child)- which doesn't impact on anything whatsoever. The 3k per parent per annum to a child- does have to be declared to Revenue- but does not generate a tax liability to either party.

Just to highlight incase people in different situations are reading this thread, you can receive up to 3k per person per year tax free from anyone. It's not limited to parent to child transactions.

Black_Knight

Megan Spicy Toucan wrote: »

Just to highlight incase people in different situations are reading this thread, you can receive up to 3k per person per year tax free from anyone. It's not limited to parent to child transactions.

ie. 3k from an individual to another individual.
ie. 3k from mam & 3k from dad to you, and 3k from your mam & 3k from your dad to your (assumed) partner.

Total of 12k tax free per year with 4 people involved.

The_Conductor

Black_Knight wrote: »

ie. 3k from an individual to another individual.
ie. 3k from mam & 3k from dad to you, and 3k from your mam & 3k from your dad to your (assumed) partner.

Total of 12k tax free per year with 4 people involved.

You may be skating on thin ice with this one......
Revenue would not consider there to be deep blue water between you and your partner........
Anyhow- we're getting away from the topic at hand......

nompere

The_Conductor wrote: »

Separate to all of this- there is an annual stipend that parents can gift children- of 3k per parent (i.e. 6k per annum to each child)- which doesn't impact on anything whatsoever. The 3k per parent per annum to a child- does have to be declared to Revenue- but does not generate a tax liability to either party.

We have several threads in this forum discussing this- normally around budget time- as it has changed a few times in recent years- the most recent change being the 3k per annum per parent (i.e. 6k) which can be disbursed to children tax free. This is known as the 'small gift exemption' (though 6k is quite a reasonable lumpsum to most people)- and was most recently revised in last year's budget.

The small gift allowance of €3,000 has actually been in place since 1 January 2003 - see Section 149 Finance Act 2003. Prior to that it was €1,270. It hasn't changed since then.

The_Conductor

The_Conductor wrote: »

You may be skating on thin ice with this one......
Revenue would not consider there to be deep blue water between you and your partner........
Anyhow- we're getting away from the topic at hand......

Its a hard one to call actually as technically it doesn't break any rule in the way that say, 3k going from A to B to C is counted the same as A to C (unless there is a long time between A to B and B to C).

For instance parents can transfer 6k from a joint account to their child, it doesn't need to be given separately so with that in mind transferring 12k from a parents joint account to a child and their partners joint account would be similar.

A good tax adviser is really the only place to go looking for a definitive answer.

nompere

In fact Revenue provide the answer:

"Indeed, two parents could, if they wished, gift €12,000 in total each year to each son or daughter and their respective partner (e.g. fiancée, fiancé, daughter-in-law, son-in-law) free of CAT."

http://www.revenue.ie/en/tax/cat/leaflets/cat-treatment-receipts-by-children.pdf

tawfeeredux

nompere wrote: »

In fact Revenue provide the answer:

"Indeed, two parents could, if they wished, gift €12,000 in total each year to each son or daughter and their respective partner (e.g. fiancée, fiancé, daughter-in-law, son-in-law) free of CAT."

http://www.revenue.ie/en/tax/cat/leaflets/cat-treatment-receipts-by-children.pdf

The last couple of paragraphs in section 4.2 of that document are still a bit confusing:

Gift of House Deposit
A Gift to a child of a deposit for a house in excess of the annual small gifts exemption of €3000 is subject to CAT.
Gifts of Money
Gifts of money in excess of the annual small gifts exemption of €3,000 are subject to CAT.

Does this mean simply that these gifts come under the remit of the relevant legislation, not necessarily that there is a tax liability?

Edit: actually, I think that's what Dominic Coyle is suggesting in that IT article linked to by Icepick.

tawfeeredux

tawfeeredux wrote: »

The last couple of paragraphs in section 4.2 of that document are still a bit confusing:

Does this mean simply that these gifts come under the remit of the relevant legislation, not necessarily that there is a tax liability?

It means that gifts over the 3k eat into your group threshold (of what ever group the giver is in) or if your threshold is already used up then tax is due.

The_Conductor

Also note- the group threshold- is a lifetime threshold- not an annual threshold- and all gifts/inheritances etc are cumulatively counted per group threshold.

filbert the fox

The_Conductor wrote: »

Also note- the group threshold- is a lifetime threshold- not an annual threshold- and all gifts/inheritances etc are cumulatively counted per group threshold.

If Revenue have set out these limits presumably they have some way of determining compliance or not?

How in a million years would they be in a position to enforce any of this cash mullarkey?

Michael D Not Higgins

filbert the fox wrote: »

If Revenue have set out these limits presumably they have some way of determining compliance or not?

How in a million years would they be in a position to enforce any of this cash mullarkey?

Random audits. The system would be self policed and you have to declare the gift, however most will not and should they be caught later, will be hit with the tax plus penalties.

filbert the fox

Michael D Not Higgins wrote: »

Random audits. The system would be self policed and you have to declare the gift, however most will not and should they be caught later, will be hit with the tax plus penalties.

How are the Revenue going to prove that anything can be connected with anything else. The oul'd Bertie excuse could be invoked:
A parent could say that they lost it on a horse and the daughter was on the winner.....

Don't get me wrong, I'm a fully compliant taxpayer who is up to date even with the dreaded water tax! I just feel that the system is open to abuse.

Michael D Not Higgins

filbert the fox wrote: »

How are the Revenue going to prove that anything can be connected with anything else. The oul'd Bertie excuse could be invoked:
A parent could say that they lost it on a horse and the daughter was on the winner.....

Don't get me wrong, I'm a fully compliant taxpayer who is up to date even with the dreaded water tax! I just feel that the system is open to abuse.

So are many systems. The rent a room scheme comes to mind. Many people should be declaring the income but don't. Sure, they don't need to pay tax on it but it could affect other things, e.g. social welfare payments.

The system is set up so that most people will follow it. Should some decide to try to circumvent any tax laws, they may or may not get caught. That's the risk they run.