Inherited house

beauf

Peregrinus wrote: »

.... If they have a viable business plan to exploit the property (e.g. by running a hotel in it) they can borrow to pay the tax liablity and then repay the borrowings out of revenue. ...

I've never thought of it, but if a property was a business, say rental and there was no PPR how does the inheritance tax differ to a PPR house.

beauf

Riskymove wrote: »

er... thats Mortgage Interest "Relief"

as in a tax credit (money bacl) to the mortgage payer....it is not a tax paid by the holder

It was the not qualify bit I was referring to.

Water John

The double taxation argument doesn't hold. You earn money in your job. You pay income tax on it. You then go out and buy something with this money and pay VAT on it.
Multiple taxation points is standard. It prevents over reliance on one tax. When the property bubble burst, CGT went with it and left the Govn't without funds.

Its the overall tax take per person is the measure. AFAIK we are about in the middle internationally.

Peregrinus

beauf wrote: »

I've never thought of it, but if a property was a business, say rental and there was no PPR how does the inheritance tax differ to a PPR house.

It doesn't differ, apart from the fact that the dwelling house exemption will not be available if what you inherit is a rental/investment property.

Peregrinus

Diemos wrote: »

Can't you see why people feel so empassioned about it though?
I've earned my money, paid my taxes while doing so and I have an asset to show for my hard work. Why should my loved ones have to pay a tax on money which I've already paid tax on?

Turn that around. Why should people who get money gifted or left to them receive it free of any tax when those who earn the same amount of money by honest toil have to pay heavy taxes on it?

The bottom line here is that (a) revenue must be raised, and (b) the burden of raising it has to be spread so far as possible in ways that are beneficial to society and fair to individuals (and there can be some tension there) and (c) people who receive wealth which they haven't earned are fortunate, and are in a position to pay additional tax over and above what they and their less fortunate neighbours both pay on their earnings.

And add to that (d); for sound historical reasons we are leery (and perhaps over-leery) of accumulated, inherited wealth in Ireland. We tried having a wealthy class whose wealth was transmitted from generation to generation by inheritance and it didn't work all that well for us as a nation. Therefore we prefer to incentise the expenditure of wealth and its redistribution each generation, leaving it to to each generation to earn its own wealth rather than inherit it.

Hector Savage

rsynnott wrote: »

I'm always amazed that people get so excited about inheritance tax. It's arguably one of our most progressive taxes; the large majority of people will never pay it at all. You have to be left over 310k to pay anything, if it's from a parent! And it's on money that you didn't generally actually do anything to earn. I dunno, just seems like a very strange thing to object to.

I'd imagine it's because all this money earned has allready been taxed, the mortgage has been taxed etc.
Seems it's an excuse to legalize robbery.
A bank robber that goes into a bank with a gun is a criminal - at least he's honest about what he's doing.
This is called "the LAW" and "Legislation" and its passed by old boys in suits clapping each other on the back - end of the day they are just the same as the bank robber.

beauf

I saw a figure of that inheritance tax only effects around 6% of estates in the UK. I don't know if that's accurate. I wonder how much income does the state gain from it. or indeed how much distribution happens.

The_Conductor

beauf wrote: »

http://www.revenue.ie/en/property/mortgage-interest-relief/what-type-of-loan-does-not-qualify.aspx



Sounds all well and good if they use the tax wisely. The first thing they did with Irish water was not fix the water, it was to fix their bonuses. etc etc. So if the state wants to tax me umpteen times on same euro, spare me the "state needs money routine" we're all out of sympathy here.

You may be out of sympathy.
The fact of the matter is- we have one of the most progressive tax regimes out there. However- it is at the stage where there has to be an added incentive to workers working a little bit harder. Why bother earning a penny over 34k (or whatever the threshold is)- when every penny over this- is taxed at 51-54%.

We are very quick to claim all manner of rights and entitlements- but very slow to try to suggest how these 'rights and entitlements' should be paid for.

Also- the state is not imaginary entity with magical money trees you can ramdomly shake to fund whatever wonderful wheeze is in the media- such as free water for everyone. It has to be paid by the tax payers of the country- by whatever means Revenue can extract the money from them.

One of our largest ongoing bills- and set to be our largest budget item in future- is social welfare entitlements and pensions. The government have already this week (and its only Tuesday) suggested increasing the pension age to 70- ten years earlier- on foot of the demographic projections that show a doubling in our retired population by 2032.

We are making all manner of promises to todays social welfare recipients and retirees- that are funded by today's workforce- but we will not be in a position to make commensurate disbursements to tomorrows unemployed people or retirees.

You make a point that people have paid money all their lives- and have a reasonable expectation that they should be in a position to hand over an inheritance to their children. I'm sorry- aside from farmers- we don't afford this luxury to any other category of person in our jurisdiction.

If you want to live in Ireland- you do have rights and entitlements- however, you also have obligations and expectations placed on you- its a quid-pro-quo, you don't get to partake of the system, without making a contribution, financial or societal, into the system.

Inheritance tax- is one of our taxes. Its one of many. Its not even a particularly big source of income for Revenue- however, its one of the fairest taxes. There are many many inequities and unfairness in our tax code- however, inheritance tax is not one of them.

Peregrinus

Hector Savage wrote: »

I'd imagine it's because all this money earned has allready been taxed, the mortgage has been taxed etc.

Most (all?) money that changes hands has already been taxed. You earn your income, pay income tax and then spend the remainder, which means giving it to people for whom it is, in turn, income, on which they will pay income tax. And so on.

"Double taxation" is generally seen as referring to the same individual paying two different taxes (or two instances of the same tax) on the same sum, but that doesn't happen with inheritance tax. If your father accumulates his earnings and leaves the accumulated amount to you, he pays income tax on the earnings but not inheritance tax, while you pay inheritance tax on the amount you receive but not income tax.

beauf

The_Conductor wrote: »

...Why bother earning a penny over 34k (or whatever the threshold is)- when every penny over this- is taxed at 51-54%....

I'm not sure how that's fundamentally different to inheritance tax.

beauf

The_Conductor wrote: »

... I'm sorry- aside from farmers- we don't afford this luxury to any other category of person in our jurisdiction....

Why should farms be excluded.

Peregrinus

The_Conductor isn't saying that farms should be excluded; he's observing that they are.

In fact they're not completely excluded, but they benefit from a substantial relief. This is based on a policy of not compelling the breakup of family farms. There's a similar relief, with a similar motivation, for the inheritance of family non-farm business property. The result is that it's passive wealth - bank deposits, quoted shares, houses, holiday properties, etc - that mainly attracts inheritance tax.

beauf

I know I'm asking why. Farms do not have the place in our society they once did. So many are no profit making and are essentially just family homes. Why treat them differently to any other house or business if we are being all socialist about it

Peregrinus

The Irish agricultural sector is still pretty big, and farms are the basis of it. The fact that smaller individual farms may not be all that profitable doesn't mean that forcing disposal/breakup would be good social or economic policy.

As for "being all socialistic about it:", I note the smiley. But it's worth pointing out that our inheritance tax policy is pretty much the opposite of socialistic, as socialism is generally understood. If socialism is about state ownership of, or control over, the means of production, then the sweeping exemptions for farm and non-farm business means that inheritance tax doesn't do that. If you want to pass your wealth on to your selfish, ungrateful, entitled 55-year old children, put your wealth into an enterprise which you yourself manage and run and leave it to them. If you choose to invest it in a large house in a fashionable neighbourhood, or in an extensive wine cellar, and leave those assets to them, then the ungrateful whelps will have a tax bill.

beauf

By socialist I meant the distribution of wealth. Since that's how we are meant to consider inheritance tax.

Sounds like double standards. Its seems if you want a "large house with an extensive wine cellar" you should do it in the country and call it a farm ... :cool:

GaGa21

So if house value is under 310k, there is no inheritance tax? Parent can just will the property to kids?

beauf

https://www.irishtimes.com/business/economy/budget-2017-inheritance-tax-threshold-jumps-by-11-to-310-000-1.2821007

FYI

Inheritance/gift tax is an abomination and should be totally abolished. You can be sure those supporting it are nothing but begrudgers. A families money should be theirs to do as the please and pass around unhindered within the family. The patent to child threshold is very low but the other thresholds are a total joke and tax becomes due very fast if relatives gift money around within their family.

Even the farm relief is not going far enough. You have to spend up to 2500 euro doing a cert to qualify and then the farm has to be worth 80% of your overall assets. Someone who owns a house worth more than 20% of the farm could be facing an eye watering inheritance tax bill which is a total disgrace.

Victor

The_Conductor wrote: »

You make a point that people have paid money all their lives- and have a reasonable expectation that they should be in a position to hand over an inheritance to their children. I'm sorry- aside from farmers- we don't afford this luxury to any other category of person in our jurisdiction.

Isn't there a similar exemption for other small businesses?

Riskymove

GaGa21 wrote: »

So if house value is under 325k, there is no inheritance tax? Parent can just will the property to kids?

its per person

if house is 900,000 but willed to three kids, none would pay tax on the inheritance

The_Conductor

Victor wrote: »

Isn't there a similar exemption for other small businesses?

Yup- Farmers and small business owners.
The only reason for this- to be brutally honest- is because they have remarkable lobby groups protecting their interests. The average PAYE employee- is a drone- compared to the farmer who has their interests protected by the IFA (and a lively social scene via Macra- who are expanding in the Dublin area in a curious fashion- we've even a Lucan branch now- thanks for the invite guys!).

Small business owners- have ISME- and the voice of their big brothers IBEC and the Chambers of Commerce- to fall back on.

Joe Soap- walking down the street- might get lucky- with a sectoral wage agreement- such as the 10% the Minister has signed off on for construction workers- or the public sector- who have a 1.4% per annum increase pencilled in for the next 4 years (which seems a bit miserly compared to the construction workers, or indeed the Gardai- but hey, its better than a cut).

It really is the case, in an Irish context- that whoever shouts loud enough gets their pet project sorted- all those who beaver away in the background and never create a fuss, bedamned.

Is this fair- hell no. However- until such time as the average Joe Soap walking down the street delivers a black eye to the government- probably at the next election, but possibly via yet another referendum- they're going to continue to be ignored.

The youth of the UK- got out and voted in the UK's general election.
If there was a similar push to get the youth of Ireland- alongside the workers- out to vote- the little pet projects that are cossetted by politicians- and the special interest groups- would see their immense power diminished.

Victor

GaGa21 wrote: »

So if house value is under 325k, there is no inheritance tax? Parent can just will the property to kids?

Note that it is a lifetime amount per recipient, with some exemptions.

beauf

The_Conductor wrote: »

Y....workers- or the public sector- who have a 1.4% per annum increase pencilled in for the next 4 years (which seems a bit miserly compared to the construction workers, or indeed the Gardai- but hey, its better than a cut)...

Working more hours, inflation and the cost of living, no overtime etc. I'm sure they'll be delighted with that.

beauf

The_Conductor wrote: »

Y...
The only reason for this- to be brutally honest- is because they have remarkable lobby groups protecting their interests. The average PAYE employee- is a drone...

Very true...:)

Blut2

State revenue is a zero sum game. The money has to come from somewhere. As such, if its a case of state revenue coming from either a) taxing people on work they do in their day jobs at high rates or b) taxing people who get very substantial (320k euros+) gifts from their parents I think the latter is far more fair.

I'd rather someone inheriting a gift of 320k+ through no work of their own pays more tax than someone who earns 33,800eur a year working 40 hours a week pays more tax. For someone to be inheriting 320k+ they're likely from a rather wealthy background to begin with.

Think of it as a "Paris Hilton" tax. Would people really rather useless rich inheritors like that paid less tax?

beauf

Blut2 wrote: »

...Think of it as a "Paris Hilton" tax. Would people really rather useless rich inheritors like that paid less tax?

I think its bit misleading to equate someone say being left a once in a lifetime 400k with someone with a income of 10 million plus a year.

Also while no fan of Hilton, its not accurate to imply she does nothing.

https://en.wikipedia.org/wiki/Paris_Hilton

Also they have a tradition of leaving the bulk of their wealth not to their children.

Hilton Family Fortune
In 1979, Barron Hilton's father, Conrad Hilton, died at age 91. He left 13.5 million shares of Hilton Hotels Corporation stock—97 percent of his estate—to the Conrad N. Hilton Foundation, a humanitarian charity which he had established in 1944.
....
On December 25, 2007, Hilton announced that he will follow in his father's footsteps by leaving about 97 percent of his estate, estimated at that time to be $2.3 billion, to the Conrad N. Hilton Foundation....

Victor

So the family will only get $100 million?

Lumen

beauf wrote: »

I think its bit misleading to equate someone say being left a once in a lifetime 400k with someone with a income of 10 million plus a year.

I'd imagine the sense of entitlement is similar. Rich people aren't known for enjoying paying taxes.

I would prefer to live in a society where people get reasonably equal opportunities in life, or at least where those natural advantages are evened out a bit. I know absolute equality is impossible and probably undesirable, but wheelbarrows of inherited cash sits just on the wrong side of the line for me.

robp

Peregrinus wrote: »

The Irish agricultural sector is still pretty big, and farms are the basis of it.  The fact that smaller individual farms may not be all that profitable doesn't mean that forcing disposal/breakup would be good social or economic policy.  

As for "being all socialistic about it:", I note the smiley.  But it's worth pointing out that our inheritance tax policy is pretty much the opposite of socialistic, as socialism is generally understood.  If socialism is about state ownership of, or control over, the means of production, then the sweeping exemptions for farm and non-farm business means that inheritance tax doesn't do that.  If you want to pass your wealth on to your selfish, ungrateful, entitled 55-year old children, put your wealth into an enterprise which you yourself manage and run and leave it to them.  If you choose to invest it in a large house in a fashionable neighbourhood, or in an extensive wine cellar, and leave those assets to them, then the ungrateful whelps will have a tax bill.

How are shares in a public company or owning let property any different any different to any other enterprise? I think a lot of people dont understand that passive wealth only comes from providing a service that other people want.

conorhal

rsynnott wrote: »

But why look at it from the parent's point of view? It's the recipient who pays (an incredibly generously low rate of) tax on it. Almost no matter what the parent spends it on, unless it's a gift to charity, tax will get paid somewhere. It's very hard to get rid of money without tax happening on the transaction at some point, except, for most people, via inheritance.

And again, this simply isn't a tax that affects most people at all. Let's say you have a house worth 600k, which is definitely on the high end. You're in your 70s or 80s, so you probably have two or three kids at least. You die, if you have two kids they each get 300k and pay nothing. This is the most generous tax treatment of a 300k windfall available, by a long way.

There'll be some people, of course, who have just one kid, in which case if they have a reasonably valuable house the kid will pay generally a very low rate. And there'll be some people who have serious wealth, maybe a house worth a million and some other assets, and the kids will pay a fair bit of tax, though still way, way less than income tax. And again this is money they didn't actually earn, in most cases. But ultimately, in a country where you have people having to pay close to 50% on everything in excess of 36k, I'm not sure that inheritance tax should be anyone's primary concern, tax-wise, really.

True, but there are other factors, often demographic and economic that are coming into play.
For starters people are having fewer kids so it's becoming more and more comon that inheritance tax comes into play on a single person.
Then there's the fact that the tax can become seriously substantial thanks to the exponential rise of property prices, which can make even a very basic and ordinary home in the right area something only millionares can afford.
As a result of that exponential rise of property prices (and of course rents that make saving for a home next to impossible), inheritance is rapidly becoming the ONLY way that many will ever get their foot on the property ladder, so people get resentful even that avenue can close off if they can't afford to inherit without selling.