That's a great point.if inherited it back in 2007 or 2008, then perhaps the house was valued significantly higher than 170,000 in which case, there's no CGT liability and your father can actually record a capital loss, which might be of use to him at some point in the future.
Ok so just to clarify, the price of the house will only impact me by reducing x amount from 335,000. No tax implication. For my father he will have to pay CGT on market value at time of inheritance - market value now. Just speaking to him it seems it was valued at far lower at the time ~€80,000, (a lot of renovation & small extension done since). Then it would be in his best interest to sell for more right to avoid CGT which would still only impact me by reducing my lifetime threshold limit?they can gift you 110,000 (170,000 minus 60,000) under the inheritance rules. If you don't think you will come near the lifetime threshold limits of 335,000 you can do that and nothing else to worry about.
Your father could gift you €3000 and your wife another €3000 and you would then "inherit" a reduced amount of €104,000. If your mother is alive and co-owner of the house, she can do likewise an reduce the "inheritance" further again to €98,000.
Alternative, your father could gift ye the house and ye repay interest free loan over the coming years. The interest that he could've earned from 170,000 would probably be below the €3000 tax free limit anyway, so ye could do that and keep your lifetime inheritance limit of 335,000 if required for the future.
Your father may have CGT liability if the house is worth 170,000 at the time of its transfer (regardless of what he actually sells it to you for). CGT would be liable at 33% after costs and expenses after an annual allowance of 1270 euro. It depends what the house was valued at the time of your fathers inheriting it 15 years ago.
Ok sorry I understand now. Yes I have three kids too so that would mean an extra 30,000 that would not be taken off my lifetime threshold limit. So then the only issue is the CGT my father would need to pay.Small gift allowance permitted of 3000 euros per year tax free. Your father could give you 3000 euro a year tax free. So could your mother. And both could give you wife 3000 euro a year tax free. So that would be 12,000 euros in total tax free a year. If you have 3 kids, your parents could each gift eah child 3000 euros which would be another 18000.
The cost of doing this could be used to reduce the CGT.~€80,000, (a lot of renovation & small extension done since).
Unless the house in going into the children's names, how would this work in practice?If you have 3 kids, your parents could each gift eah child 3000 euros which would be another 18000.
no the kids would have to be named on the house for that to work. I meant as a general piece of information.Ok sorry I understand now. Yes I have three kids too so that would mean an extra 30,000 that would not be taken off my lifetime threshold limit. So then the only issue is the CGT my father would need to pay.
OK, this would be the bank of mum and dad scheme then right? How does that work in practice? My parents sign over the house to me and my wife and this is repaid how specifically? Directly into their bank account. Are their set amounts to be paid over time or is it ad-hoc?If your father is giving you the house and it's an interest free loan. If the house is in your name and your wife, then once the interest that could've been earned by your father with the sale proceeds (instead of gifting you the house) is less than the 6000 euro annual small gift allowance (3000 for you and 3000 for your wife) then you are fine. You can repay the loan over time.
Yes.Is it possible to apply for a mortgage to cover purchasing the house and the extension.
You would be immediately paying 60k to parents, so I don't understand 'periodically' here?i.e. using 60,000 of the mortgage to periodically transfer over to my parents to cover the house.
I thought I could only pay x amount each year (small gift allowance)Yes.
You would be immediately paying 60k to parents, so I don't understand 'periodically' here?
No.I thought I could only pay x amount each year (small gift allowance)
That way would be quite drawn out though wouldn't it.1 way they can do that is to legally sell the house to you for 170k, but you owe them the money. And each year they 'write off' 6k or 12k as a gift, reducing the amount you owe them.
If we were to do this, could the 60,000 from 170,000 mortgage be repaid swiftly?Alternative, your father could gift ye the house and ye repay interest free loan over the coming years. The interest that he could've earned from 170,000 would probably be below the €3000 tax free limit anyway, so ye could do that and keep your lifetime inheritance limit of 335,000 if required for the future.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?