Buying Property for Child Starting College - What’s the Best Approach?

[Dred81]

Thanks all, I assumed the property had to be in her name to avail of the rent-a-room scheme so that solves that issue - we’ll buy in our name

 

[Roro999]

The condition is that is her principal primary residence.

She doesn’t have to own it but does have to live there most of the time.

While that holds I would think if any capital gain tax would have to be paid. If she owned it I would think no CGT.

 

[NoRegretsCoyote]

If she owned it I would think no CGT.

Indeed but any gift from parent eats into lifetime CAT allowance.

For many of the reasons outlined above it’s simpler if the parents buy it. A transfer can always be done at a future point.

 

[Lim_12345]

Thanks all, I assumed the property had to be in her name to avail of the rent-a-room scheme so that solves that issue - we’ll buy in our name

We are in a similar position, buying a house, but intend for my son who is in college to move in to it. House in our name. I do not think he can get rent a room relief if he rents out a room. Did you get an answer as you have similar situation ?

 

[NoRegretsCoyote]

I do not think he can get rent a room relief if he rents out a room. Did you get an answer as you have similar situation ?

It’s answered conclusively at the start of the thread.

 

[Lim_12345]

It’s answered conclusively at the start of the thread.

If this is the answer from start of thread: "Buy the property in your own name. Your daughter can avail of up to €14,000 a year tax free under the rent-a-room relief. She just has to live there, not own it", I'm not sure if this is entirely correct and that is why I asked if a definite answer was sought and confirmed. In this case the daughter will receive income from something that she was neither gifted nor paid market rent on.

 

[NoRegretsCoyote]

Your daughter can avail of up to €14,000 a year tax free under the rent-a-room relief. She just has to live there, not own it",

Rest assured it is entirely correct

 

[ClubMan]

Rest assured it is entirely correct

In case anybody still doubts it.
(Emphasis is mine.)

4. Qualifying residence

4.1 Sole or main residence

The room or rooms must be in a residential premises situated in the State that is occupied by an individual as her or his sole or main residence during the particular tax year. An individual may live in more than one residence but can only avail of rent-a-room relief in respect of her or his sole or main residence. In general, an individual’s sole or main residence is that individual’s home for the greater part of the time and where friends and correspondents would expect to find him or her. The individual does not have to own the residence and it could, for example, be occupied as rented accommodation.

 

[LLB123]

Indeed but any gift from parent eats into lifetime CAT allowance.

For many of the reasons outlined above it’s simpler if the parents buy it. A transfer can always be done at a future point.

So the 14k p/a tax relief is outside of the CAT allowance and can be put into a savings scheme or somesuch etc for the daughter? Or am I misunderstanding?

 

[misemoi]

My understanding on this is that CAT doesn't apply on support of a child <25 in full time education per the below

Exemption for support, maintenance and education payments

Income or gains that are exempt from CAT

www.revenue.ie

So in theory if you buy the house, it remains in your name but becomes your child's primary residence, no CAT is due on the free housing you are providing and the child can claim the rent a room relief if they then sublet any of the space.

As long as the child genuinely kept the funds - max 14k pa, imagine you have two siblings sharing a room, renting the spare room and sharing the proceeds?

I don't know of anyone doing this in practice so I am not sure if Revenue would consider this a mischaracterisation of income?

 

[RedOnion]

So the 14k p/a tax relief is outside of the CAT allowance and can be put into a savings scheme or somesuch etc for the daughter? Or am I misunderstanding?

The 14k income must be to the child, who is resident in the property for most of the year. They can claim rent a room relief,coven if they don't own the property.

If the parents are involved, the rental income is taxable.

What I don't believe is as clear cut as others is if providing a 4 or 5 bedroom house to a child rent free is outside the scope of CAT.

 

[misemoi]

This is what I am wondering. A two bed apartment for two children would be ok I assume, and if the two children decide to share to make additional income from the available space, is this reasonable?

 

[NoRegretsCoyote]

What I don't believe is as clear cut as others is if providing a 4 or 5 bedroom house to a child rent free is outside the scope of CAT.

I tend to agree. The Revenue guidance says :

The provision of the use of a house owned by a parent rent-free, to a child not more that25 years of age who is attending university, to help support and maintain the child while in university, is a normal and reasonable provision and is, accordingly, exempt from tax unde Section 82 CATCA 2003."

Giving a child free use of a very large house to let rooms to other students could be regarded as pushing things beyond a reasonable boundary.

 

[T McGibney]

The whole idea is a bit crazy. Fair enough if the OP has made a strategic decision to invest medium- or long- term in student accommodation but buying a place simply because a child is expecting to live there for a few years doesn't really stack up in terms of logic.

 

[lff12]

This is what I am wondering. A two bed apartment for two children would be ok I assume, and if the two children decide to share to make additional income from the available space, is this reasonable?

Or you take the additional rental income & use it to cover any costs you might have?

Know people who did this years ago when Revenue's treatment of property was a bit more lax, to say the least. It worked out well, and they had somewhere safe & secure to stay while studying. But it would make sense to get somewhere small.

FWIW, while my elderly aunt is in a home, her grandchildren are delighted to use her empty Clontarf home as a base for themselves while they work and study in Dublin (their home is Tralee). Its an expensive way to do things short term, but if the plan is to subsequently use as a normal rental its not bad, but Revenue's treatment of this setup is always going to be subject to the preference of the day RE Revenue treatment of non PPRs.