Gift from parents - Tax implications for spouse?

We're in the process of buying a house from my parents.

They plan to gift us a certain amount of the house and we'll get a mortgage for the rest. I know a parent can give a gift to a child and they won't have to pay tax up until over €400K.
The amount isn't that much but as the gift is to us both (the house is between me and my wife) what are the tax implications for us as my wife will also be a beneficiary?
I had a look on revenue.ie but it only mentions parent -> child. There's no mention of parent -> child and his other half.

How much is the house worth and how much are you paying your parents for it? Also will they continue to live in house or not?

Your parents can give you a gift of up to €521,208 tax free. For your spouse however the threshold is only €26,060. As it is a gift your spouse (and yourself) are entitled to the annual small gift allowance of €3,000. Therefore if the gift to your spouse is from both of your parents your spouse can actually get €32,060 tax free. Everything over this is taxed at 20%. This is presuming that your spouse has not recieved any prior gifts or inheritance since 1990 from non-relatives.

A few years ago my then partner's father was giving us land to build a house and we had the same problem, what we done was let his dad give him the gift of the land then when all of this was done he signed half of it over to me.. worked fine for us...

mickoneill30 said:

We're in the process of buying a house from my parents.

They plan to gift us a certain amount of the house and we'll get a mortgage for the rest. I know a parent can give a gift to a child and they won't have to pay tax up until over €400K.
The amount isn't that much but as the gift is to us both (the house is between me and my wife) what are the tax implications for us as my wife will also be a beneficiary?
I had a look on revenue.ie but it only mentions parent -> child. There's no mention of parent -> child and his other half.

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Hiya

Have you been living in this house for the past 3 years, by any chance? If you have, you could look into using the dwelling house exemption from capital acquisitions tax. If you haven't you could try to structure the transaction so that the gift element is coming from your parents to you only (I'm not sure if this will work but you should ask your solicitor about it). Your lender will require that your parents sign something confirming that the gift is not returnable & that they are not taking any interest in the property.

my husband and i were in the same situation a few weeks ago. We are getting a gift of money from his dad and had to get a letter to prove this to the bank. In the letter we got his dad to say that he is gifting x amt to his son... and no mention of me... no tax implications for me as a result.

Thanks for the replies guys. It gives me some stuff to ask my broker & solicitor to figure out.

In answer to the questions above.

The house is worth about €500K roughly. I'm in the process of arranging a valuer. The gift amount will be roughly €150K. Our aim is to get a mortgage for €350, pay some cash as deposit and get the rest as gift.
My parents don't live in it now. They did a few years ago. They never rented it out.
We moved in two years ago.

If you have been living there 2 years is there any way you could delay the purchase until you have been there 3 years? If so you could possibly claim dwelling house relief from CAT.

There are other conditions but it might be an option you could explore.

The rules relating to the dwelling house relief for CAT were changed last year. I don't think you can claim the relief any longer for a gift but a tax advisor can confirm this for you.

Hiya

The dwelling house exemption would be a very useful tool for you if you could hold off buying the house for another year. The rules did change last year but it was in relation to a gift of a dwelling house where the disponer (the person giving the gift) is also living there - in that case the disponer must be old or infirm in order for the beneficiary to qualify for the dwelling house exemption.

There are restrictions however to this exemption which you should consider ie you need to retain the house for 6 years although it would be possible to replace the property with another property during that time.

The main advantage for you here is that your parents could give the gift of 150k to you and your spouse free from capital acquisitions tax plus it would not be aggregated with any past or future gifts or inheritances - you would maintain a clean slate, so to speak. To clarify you can take a gift or inheritance from your parents up to €521,208 (group a threshold) and your spouse can take €26,020 (group c threshold) assuming you have no prior gifts or inheritances since 1991.

I'm sure you are already aware that your parents will be liable to CGT on any gain they have made on the house since it doesn't appear to be their principal private residence.

The relevant thing is that the OP is married. The 'gift' is €150K so it falls well below the c.€520K parent to child allowance. The gift is from parent to child. Then you are giving half this to your wife (husbands and wives can obviously transfer any amount between themselves) Just document it all and get professional advice for peace of mind.

John Rambo said:

The relevant thing is that the OP is married. The 'gift' is €150K so it falls well below the c.€520K parent to child allowance. The gift is from parent to child. Then you are giving half this to your wife (husbands and wives can obviously transfer any amount between themselves) Just document it all and get professional advice for peace of mind.

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It is true that husbands and wives can transfer amounts between them but they cannot be seen to do this in order to evade tax! Revenue would look through something like that and deem that the gift came from his parents to his spouse.

The best bet would be to either try to use the dwelling house exemption or alternatively structure it so that the gift goes from the parents to the son. A few years down the line he can transfer the amount to his wife but it needs to be handled carefully!!

eamonn22 said:

It is true that husbands and wives can transfer amounts between them but they cannot be seen to do this in order to evade tax! Revenue would look through something like that and deem that the gift came from his parents to his spouse.

The best bet would be to either try to use the dwelling house exemption or alternatively structure it so that the gift goes from the parents to the son. A few years down the line he can transfer the amount to his wife but it needs to be handled carefully!!

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I could be wrong but I don't think that's tax evasion...it doesn't make sense if you think about it. How are parents supposed to give their offspring anything if it's deemed to be a gift to the wife as well? A parent giving their son 150,000 in cash and then him giving his wife 75,000 clearly wouldn't incur any tax liability so why would it in this case?

we were in a similar situation, although parent still living in the house. put our names on deeds (3names), ended up not having to pay capital gains for my spouse. we had lived in the home for 3 years previousaly so dont know if that made a differance, and then on the death of my parent were able to transfer deeds into our two names with no problems.

John Rambo said:

I could be wrong but I don't think that's tax evasion...it doesn't make sense if you think about it. How are parents supposed to give their offspring anything if it's deemed to be a gift to the wife as well? A parent giving their son 150,000 in cash and then him giving his wife 75,000 clearly wouldn't incur any tax liability so why would it in this case?

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The parents are perfectly entitled to gift their offspring anything up to €521,208 (2008 figure) before CAT will be payable.... however they can only gift their offspring's spouse up to €26,020 (2008 figure) before CAT will be payable. The problem is - if they gift €150,000 to their son and he immediately transfers €75,000 to his spouse then Revenue will look through this transaction and deem that the €75,000 came from the parents to the offspring's spouse and tax will be payable on anything over €26,020 plus €3,000 for small gift exemption.

My point is that they need to be careful that this doesn't happen!