Gift tax vs loan for family member.

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Thirsty

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I wasn't entirely sure where to put this query. But since its in relation to gift tax this seemed to be the best.

Close family member is planning house purchase. I would like to help with a lump sum.

If I give them 50k, it is taxable as a gift.

If we draw up a loan agreement for the 50k, interest free & repayable at say €100 per month; then it is not a gift and so gift tax doesn't apply?

Since it's interest free then the €100 per month is not income for me?

Can any unpaid loan be 'forgiven' on my death?

Can / should that be included in a codicil to my will?

Edit to add this from Revenue

:Interest free loan
If you receive an interest free loan, this is a benefit and you may have to pay tax on it. The relevant tax date for this benefit is 31 December each year until the loan is paid off. The value of the benefit is the rate of return the funds would generate if they were invested on deposit."

Given that deposit rates are so low, I would think any tax here would be minor.
 
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Yes, the loan is not a gift and the repayments are a nothing from a tax perspective.

But forgiveness of the loan on death turns it into an inheritance.

The €3k Small Gift Exemption can be useful to speed-up the write-down of the loan.
 
The Income tax return asks you to tick a box if received a gift or inheritance. Ideally it should ask if below €3k gift, otherwise it prompts Revenue that a CAT liability might arise when there is none. If one receives a €3k tax free gift I'm not sure if you should tick this box. I would keep any documents on file to prove it was a gift in case queried at a later date.
 
A bit long winded but if you want to give them this €50K then loan it to them with a repayment rate of €3K per calender year and in the same calender you gift them back the €3K. It would mean the loan value falls €3K per calender year and so does not effect any inheritance allowance you have. If the loan is to 2 people than you can do as €3K each.
 
john luc said:
A bit long winded but if you want to give them this €50K then loan it to them with a repayment rate of €3K per calender year and in the same calender you gift them back the €3K. It would mean the loan value falls €3K per calender year and so does not effect any inheritance allowance you have. If the loan is to 2 people than you can do as €3K each.
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No need to do that.

You can just write-off the €3k. And with couples involved, you could do up to €12k. e.g. €50k loaned by Mum and Dad to Daughter and Son-in-Law.
 
you could do up to €12k. e.g. €50k loaned by Mum and Dad to Daughter and Son-in-Law.
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interesting - grandparents also? I'd guess going out to Aunts and Uncles might be a push?
 
Thirsty said:
interesting - grandparents also? I'd guess going out to Aunts and Uncles might be a push?
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I’m not sure what you mean. The tax treatment flows from the commercial reality. If my parents and my aunt and uncle club together to lend €50k to my wife and I, then they’re free to write off €24k a year. But if it’s a ready-up being funded entirely by my parents behind the scenes, then they’re not.
 
Understood.

So as long as we can show we all contributed to the 'buy-a-house' kitty, each extended family member can gift the 3k. Do I have that right?
 
If the annual €3k gift was also given to minor children of the loan recipients, and was used to reduce the loan capital , would this give rise to any further tax implications .
 
AlexaWho said:
If the annual €3k gift was also given to minor children of the loan recipients, and was used to reduce the loan capital , would this give rise to any further tax implications .
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Yes, it would as the benefit is flowing to the parents so it’s a gift to them.
 
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