Gifting a rental property can be a costly business

Q&A:I want to give my daughter an apartment I own, which at the moment is rented. How much money will it cost me to transfer it into her name? Is there any tax due? I have no mortgage on this property. Is there any stamp duty, etc?

It’s probably worth about €200,000 to €250,000. She is a student so therefore the income could go towards her expenses as she is a postgrad student and we get no grants. Ms AD, Dublin

There are several issues at play here if, as I understand it, you are suggesting transferring an investment property that is currently rented to your daughter with a view to her benefiting from the rental income.

First, you will have a capital gains tax obligation on the difference between the price at which you bought the property and the value when you transfer it to your daughter. You will be allowed to deduct expenses incurred in buying and transferring the property from the gain before assessing tax, and there is also an exemption from CGT of the first €1,270 of the gain.

The situation is even more awkward from your daughter’s perspective. The transfer is deemed a gift and, at that value, brings your daughter close to the threshold above which she would be paying capital acquisitions tax. That threshold is currently €250,000 on gifts and inheritances between a parent and a child.

If she has received no such gifts or bequests to date, she will be fine, but would have little scope for further benefit down the line.In relation to stamp duty, she is also likely to have to pay it at 1 per cent on the value of the property.

If she is benefiting subsequently from the rental income, she will be liable to income tax on that income, minus certain allowable expenses.

If the purpose is to fund postgraduate course costs and maintenance, you might consider other ways to do so. If, on the other hand, you are looking to provide her with a home, the costs to her should not be particularly onerous.

A matter of principal

I have a principal private residence and a holiday home in the country. If I sell my principal private residence and move into my holiday home on a permanent basis, what tax liability would I have? Would I have a capital gains tax liability on my principal residence or would I have any liability? Mr AT, Meath

It’s a fancy name, but principal private residence effectively means your home. Everyone who owns a property has a principal private residence – but only one, although clearly it can change over time.

If you have more than one property, the principal private residence will be the place where you habitually reside. Any other properties – houses and apartments bought as investments, or holiday homes – are considered investments.

The bottom line is that you will never have a capital gains liability on your principal private residence as long as it has never been rented out.

In your case, you are talking of selling your main home and moving into your holiday home. Assuming you never rented out your home during your period of ownership, you will have no liability to capital gains or any other tax.