Gifting property to my son

Q&A: Dominic Coyle

Revenue has tightened the rules significantly regarding the dwelling house exemption. Photograph: iStock

Revenue has tightened the rules significantly regarding the dwelling house exemption. Photograph: iStock

 

I know there is an arrangement by which one can leave the family home to a son or daughter, who has been living in it for at least three years, tax free.

Is there any arrangement by which a son who has been living in a house owned by me, but not my family home, for over three years – and has in fact spent money and time renovating it – could receive it from me as a tax-free gift?

I have read some conflicting news items about this recently, and I would appreciate clarity in the matter.

Mr S.T., email

Not any more. The rules regarding the dwelling house exemption – the measure that allows you to pass the family home to someone tax free – have been amended many times since the measure was first introduced in 1991. So it’s not entirely surprising that it can be difficult to get a proper fix on them.

Certainly, at one point – between 2000 and 2016 – there was nothing to stop you gifting a property like this to your son (or to anyone else) free of tax as long as you had owned it for three years. But Revenue persuaded then minister for finance Michael Noonan in 2016 that the measure was being used for extensive tax planning by wealthy families.

To curb such tax avoidance, where parents were effectively supporting independent adult children financially and getting tax relief to boot, the rules were tightened up significantly. With limited exceptions you can now avail of tax relief only in cases of inheritance and not for gifts.

Gifting

The property concerned must be the family home and the recipient must have been living there for at least three years before inheriting it.

Gifting of property while alive is now permitted only for people who are dependent on you by virtue of being “permanently and totally incapacitated due to a physical or intellectual disability”, so much so that they are incapable of earning a living. The only other scenario is where the recipient is over the age of 65 which would be very much the exception rather than the rule in such cases.

Clearly, outside the dwelling house exemption, your son is entitled to inherit – or receive as gifts – sums up to €320,000 from parents over the course of his lifetime. Depending on the value of this property and on any other inheritance and gift in excess of €3,000 in a given year that he has already received or will do so, he might not have any tax to pay once ownership passes to him.

In any event, the €320,000 threshold – a figure that is open to adjustment up (or down) by the minister for finance in any budget – should at least reduce the amount of tax he would have to pay on the property.

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

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