Parent pays off mortgage - Tax implication?

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machalla

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I have a question that was put to me recently.

If a parent living in a house owned by a child offers to pay off the remainder of the mortgage on that house is there a tax implication?

The parent does not have their name on the mortgage for a start but it is their primary residence and they are the sole resident at this point in time (the child having moved out and bought their own home with a partner).

My immediate reaction was that there should be no problem but they are concerned about tax implications.

You mention you used to be good at taxation in university and everyone thinks you're an expert! I don't even work in the accountancy field at all.

Any advice on this would be very helpful. Thanks!
 
Possible gift tax for a start. Although the threshold for gifts from parents to children is currently €466,725. But be aware that this is for all gifts inheritances received, so the gift of the mortgage repayment would be taken into account when calculating future liabilities.
 
Agree with the last point. There is tax implications but it depends on other circumstances. As the previous person said a parent is allowed gift €466,738 to a child without incurring any tax. This sum takes into account all gifts recieved by that child from there parent since 5/12/1991 (i.e. on an accumulative basis). That is to say a total of €466,738 since 1991 rather than €466,738 per annum.

Now a child gifting to a parent can avail of the €466,738 threshold under certain circumstances. If they are living in the house then this would qualify under this threshold.

Therefore provided that the gift been giving doesn't make the parents exceed the current limit of €466,738 then there is no tax liabilty/implications.

For further information and contact details go to www.revenue.ie and type in "gift tax" in the search facility and it will give you all the details you require.
 
Thanks for that. I looked it up under gift tax and found two documents cat1 and cat10 that outline the positions on gift tax and the exception made for dwelling houses.

The only thing being I thought that the gift tax allowance of €400k+ only applied between parent to child and not the other way around?

I was asked about this before and it seems it may only apply one way.
 
If you check the link i gave you it specifically states that a transfer from child to parent may qualify in certain circumstances. As the parents reside in this house and it is their private residence this falls under that heading. they are not penalised as it is there private dwelling.

To fully clarify this there is a contact number on the link i provided that should clear it up.
 
Hi, contacted Revenue it appears that your parents would not be entitled to Group a thresehold (€400,000 plus limit)

however they may avail of the dwelling house exemption if they satisfy certain conditions which are:

1) have continously occupied the dwelling house as there main residence for a period of three years prior to the gift
2) continues to occupy that dwelling house as there main residence for a period of six years commencing on the date of the gift

then that gift is EXEMPT from CAT. Now there are a couple of other small conditions such as your parents must not be beneficially entitled to any other dwelling house at the date of the gift.

sorry for the confusion, hope that clears it up.
 
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