Paying off parents mortgage

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settlement

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Hi all,

Would paying off one's parents' mortgage be considered a gift?

For example, one hundred thousand outstanding, I offer to pay it off. Would that have to then be taxed? Seems silly
 
It would, but they should have their Group B thresholds (circa €35k each) and the €3,000 Small Gift Exemption.
 
If you inherit this money back in future you could end up paying tax on it yourself. Depending on circumstances an interest free loan to parents might be an option.
 
RedOnion said:
If you inherit this money back in future you could end up paying tax on it yourself. Depending on circumstances an interest free loan to parents might be an option.
Click to expand...

How does one differentiate an interest free loan from a gift in the eyes of the law?
 
settlement said:
How does one differentiate an interest free loan from a gift in the eyes of the law?
Click to expand...
I'm not familiar enough with this area, but through a paper trail. Someone else might be able to advise, but you could go as far as registering a charge against your parents home to protect you inheritance in the future.
My understanding is that effectively the 'free interest' is treated as a gift to your parents each year, but under the annual exemption in your circumstances. Might factor in if there are other gifts being made.
 
An interest free loan can incur a tax based on the value of what the interest would be on a commercial loan. The free interest is a benefit. Because everyone can give everyone a €3000 gift per calender year you can charge them interest and give it back each year as a gift. Only other issue with this is the interest you supposedly received is income
 
Hi settlement

Simplest is to give the €35k each this year. No tax implications.

Next year, give them €3k each. etc.

The interest-free loan is probably the best alternative. I don't think that Revenue would be remotely interested in this.
 
Thanks all

In the transfer of the 35k, is there a specific way to do it so as to simplify matters for taxation in the future, or simply transfer it and be done with it?

Also, can they simply transfer the funds back (at a later stage), in the same manner, tax free (the same sum)?
 
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