Getting our daughter on the housing ladder

Q&A: Dominic Coyle

If this is a second house, you are facing a tax bill regardless of whom you sell it to – assuming it is not in negative equity

We would like some information on what is the most tax efficient way to sell our second home to our daughter. We built a new house and moved in 2010, and rented the old one from 2011 to 2018 and maybe 2019.

Can she buy it at a reduced price and what are the capital gains tax issues for us and stamp duty for her? Is there any way she can rent to buy and if so how does it work? Can we sell a half share ?

Ms MK, email

The old days when preferential arrangements could legitimately be made on the transfer of assets between family members – including adult children – have been tightened up dramatically by Revenue in recent years following perceived abuse of the system by wealthier families.


If this is a second house, you are facing a tax bill regardless of whom you sell it to – assuming it is not in negative equity. And, depending on its value, your daughter also faces a potential tax bill.

Looking first at your own position, you don’t say how long you owned this house but for the past seven years it has been rented out. While the sale of a principal private residence – a main family home – is tax-free, that changes once the property is let out for any length of time.

If you sell, you will be required to determine the percentage of the period of ownership during which it was an investment property - ie rented out. For the purposes of this calculation, you discount the last full year of ownership under Revenue rules.

Whatever this percentage is, you and your husband will be liable to capital gains tax at 33 per cent on this proportion of any capital gain on the sale of the house – whether it is to your daughter or to anyone else. In this regard, you have a €1,270 annual capital gain exemption that can be used to reduce your tax liability.

Of course, if you hold on to the property until you die, any capital gains tax liability is eliminated – but that does not address the position you raise.

Turning now to your daughter, as you mention there will be stamp duty on any purchase by her. That will amount to 1 per cent of the value, assuming it is under €1 million.

Can she buy it at a reduced price? Well, she can, but it will raise capital acquisitions tax issues.

Unless such transfers are done at market rates, Revenue not unreasonably determines that a form of gifting has taken place – in this case a gift amounting to the difference between what she pays and what she would have paid if the full market price of the property was charged.

This doesn’t have to be the end of the world. Parents are allowed to gift or bequeath up to €310,000 between them to a child before that child actually has to pay any tax on such gifts. If the difference between the market price and the price actually paid by your daughter is below this amount, she should not have any tax bill to pay beyond stamp duty.

Many people worry about using this “inheritance” threshold up while they are still alive but if it would benefit your daughter more to have access to the threshold now to allow her buy the home then there is no reason to put the benefit off until either or both of you die – a time when she might no longer need such support or when the opportunity to purchase this home may well have passed.

Getting security to half a property is a messy scenario from their point of view and they might want nothing to do with it

This threshold is a lifetime limit, so if your daughter has previously received any substantial gift from either of you (in excess of €3,000 per annum), it would reduce the amount available to her on this transaction before tax kicks in.

The €310,000 threshold can move, and the Government is committed to raising it to around €500,000 over time. However, from her point of view, the important thing is the threshold in the year she completes the purchase from you, if that goes ahead.

I’m not aware of any rent-to-buy scheme that would facilitate the arrangement you are examining. But what about your daughter buying a portion of the property?

There are a couple of issues here. First, you will still likely have a partial capital gain to pay now, with more to come when the second half of the property is sold.

More importantly, it may prove difficult for your daughter to get a mortgage in these circumstances. Mortgage lenders are very committed to claiming clean security to back mortgage loans. Getting security to half a property is a messy scenario from their point of view and they might want nothing to do with it.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email This column is a reader service and is not intended to replace professional advice