Question re tax implication for retired parent

T

tullahought

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My siblings and myself are about to contribute €50 per week each to supplement my parents pension. They are both living on my Dad's state pension at the moment - all of their retirement money was tied up in bank shares. This arrangement will generate about €15,600 in extra income for them (52 weeks by €50 x six siblings) - will they have tax to pay on this?
 
AFAIK, any individual, irrespective of their relationship, can make a gift of up to €3,000 to another in any year without the recipient incurring a liability for gift tax. I'm not sure about income tax.
 
Depending on ages and personal circumstances of your parents, you may want to consider Deeds of Covenants if they are over 65 or permanently incapacitated.
 
Many thanks for this information. I notice from the Deed of convenant info that you cannot receive benefit from the person you are 'covenanting' the money to, my dad is 85 - if he passes away before the 7 years are up and we are left something in his will could it then argued that this was somehow benefit (sorry, probably a stupid question). Also, the D of C info seems to applicable to people trying to claim tax relief on donating this money (hadn't even occurred to me) I was wondering if my parents would have to pay income tax.
 
Income from a deed of covenant would be taxable in your parents' hands. However, depending on how much their pension is, they may still be below the income threshold for income tax for those aged over 65 (currently €40k for a married couple). If they are subject to tax at 20% but you and your siblings can get tax relief at 41%, it would still be a tax efficient move.

If you decide against the Deed of Covenant route and just gift the money to your parents, then the value of the gift falls below the "small gift exemption" and there is no tax on this money for your parents and no tax relief for you and your siblings.
 
Asuming that both parents are over 80 and getting the full amount of State Contributory Pension this should give them income of around E23,200 + E15,600 from family, total = E38,800. This leaves their income blow the taxable level of E40,000
 
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