Gift - Parent to Child

J

jobseekr1

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Hi folks,
If a parent gifts a cash payment of less than the 225,000 threshold to a child is it necessary to get a legal document drawn up/or notify revenue, or will it be obvious via their electronic system that it is from parent to child etc?
Thanks!
 
the system requires a PPs number for both parties and it asks what the relationship is.
Its a self assessment return.
I believe if the amount is more than 80% of the threshold that the beneficiary needs to make a return: you might look at revenue.ie
 
The child will need to make a CAT return (IT38) if the amount of taxable gifts/inheritances received from parents in the child's lifetime, including the current gift is over 80% of the parent child threshold which is currently 225k (80% = 180k). 3k of each gift from a parent each year is disregarded for CAT purposes.

For example if child received first ever gift of 50k from parent in 2010, then has taxable gift of 47k - no need to make a return. In 2012, child received 150k from parent - taxable gift of 147k, has now received 194k in their lifetime and needs to complete a return - but no tax is payable because total amount received is still below threshold.

In 2014, child receives a further 60k from parent - taxable gift of 57k, and has now received taxable gifts of 251k in their lifetime. They will pay CAT of 8.6k (251-225 x 33%). On any subsequent gifts/inheritances from parents they will pay CAT on the full amount of the taxable gift as they are above the lifetime threshold.

Reasonable amounts given by parents to children for support, maintenance and education purposes are disregarded for CAT purposes.

Where children are likely to receive over 225k from their parents (or their spouse's parents if their spouse pre-deceases them) in their lifetime they should look into getting advice on tax planning.
 
Thanks

Hi folks,
Thanks for getting back to me with such good information, so to clarify, hypothetical situation.
If a parent gifts a child 224,000, any future gift/inheritance would be taxed at33% on anything over that and this would include the monies received from the sale of parents home if they passed away?
So if for example, if the child inherited a house sold at 100k, and they had received for example, 225k in cash, they’d pay 33% on the house sale, as it would take their total inheritance to 325k?
Does the return need to be done online before the physical transfer of cash from one bank account to another occurs?
 
Jobseekr1,

That's right - CAT (Capital Acquisitions Tax) at 33% after reaching the threshold - that's why it's worth considering tax planning with a tax advisor.

The CAT 'year' runs from 1st September to 31st August. Return and tax due must be paid by the following 31st October. So taxable gift of 300k made on 25th December 2013, the person in receipt of the gift must pay the tax due and complete the return by Oct 31st 2014. So the return is made and tax is paid after the gift occurs.
 
Thanks for that Zaachaos, you know your stuff, but surely a tax advisor can just advise on the state obligations etc? If tax is to be paid it will have to be paid?
Is there any vetted list of tax advisors? I have no experience of this, thanks!
 
The Irish Tax Institute maintains a list of its members with details of their specialist areas:

[broken link removed]

There are some exemptions and reliefs from CAT, that may be suitable in a given set of circumstances. From the simple ones like the annual 3k gift exemption which becomes more valuable when you hit the threshold. There's a dwelling house exemption that allows a house to be gifted tax free under fairly limited circumstances.

Capital gains tax and stamp duty may also be a consideration when gifting an asset, but not when it's inherited - neither arise on a death.


So in many cases it's not the case that the tax has to be paid - with some careful planning, sometimes very simple, other times more complex, your tax bill can be reduced.

Of course, how something is taxed shouldn't be the only driver in making decisions on gifts/inheritances, and tax planning is only if use if it fits the wishes and intentions of the doner.
 
So, if I inherit a property from my deceased parent and its value is/was 100k, then I sold it for something near that price, I will have no tax to pay?
 
As long as you haven't received any other inheritance from a parent that when added to the €100k brings you over €225k. That is your lifetime limit on inheritance from your parents, anything under that is tax-free.

In 2009, the threshold was €542,544 and I think the tax rate was 20% at the time. It's changed a huge amount since then.


Steven
www.bluewaterfp.ie
 
Slightly off tangent, but still on the subject of gift/tax..

If I as a parent pay for postgraduate degree fees for children, is that considered a gift? Cost of fees etc would be well above the 3k mark.
 
It is considered a gift but may fall into the education exemption.[broken link removed]

There is a reference to reasonable in relation to the disponers circumstances. But who is to say what is reasonable these days where a postgrad is seen as a primary degree of 20 years ago.
 
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