Do you have to declare small gifts on tax return?
Q&A: Dominic Coyle
While €3,000 may not seem like a life-changing sum in itself, paid annually to each child and even grandchild where finances allow, it is a way of limiting exposure by them ultimately to inheritance tax. Photograph: Joe St Leger
You frequently mention the annual small gift exemption of €3,000 being payable without tax implications to children of a marriage. Does this payment have to be mentioned on the disposer’s annual tax return to Revenue?
Mr CO’R, email
I do mention this exemption regularly. It is one of the most underused and useful legitimate ways of gifting to family and others. It certainly is not limited just to children within a family though, undoubtedly, it is a way of giving children (and indeed grandchildren) a helping hand when they might be a little constrained financially . And, of course, it is a form of estate management. That €3,000 may not seem like a life-changing sum in itself but, paid annually to each child and even grandchild where finances allow, it is a way of limiting exposure by them ultimately to inheritance tax.
Of course, the most important thing is that efforts at estate planning do not end up leaving you or your wife in a precarious financial position simply to making things easier for succeeding generations. Your first priority, obviously, is to ensure you have sufficient financial resources to live on comfortably in your older years – especially as your earning capacity may be behind you.
I don’t believe that it has to be declared on the disponer’s tax return – or on the beneficiary’s either for that matter.
Having taken a quick look again at the Form 11 tax return, I can’t even see where you would enter the detail. Beneficiaries might class it as other income but it isn’t; it’s a small gift. That’s the whole point of it.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to firstname.lastname@example.org. This column is a reader service and is not intended to replace professional advice