Tax Liability - Receiving rental income as gift from father.

sue m

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Before I start. Yes I know I am very lucky and yes i am aware of my tax liabilities. Long story short , my sibling got a gift of lump sum to buy house a few years ago and last year when i was building a house , my parents rented out my grandmothers house (mortgage free) and I have been gifted the rent money each month for a year. I understand I owe tax on rental income but how to pay tax for a property I dont actually own, I am being gifted money. I have been carrying out all repairs and paying all costs for the last year.
 

Bronte

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Looks like two separate transactions here. The rental income belongs to the house owner and they would pay the tax on that. Then the rental income is transferred to you as a gift. It gets more complicated however, as you are paying the costs, is that a gift back to your parents. This is messy. The costs come out of the rent, so than you don't get all the rent as a gift. etc etc.
 

sue m

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My Father owns house. I have recieved about 8800 for the four months in 2018. Rental started in Sep 2018. I have paid all costs including fees to rent out property.
 
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elcato

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Is your father retired ? You will need to fill ina form 12 for your father for 2018 and he will have to pay tax accordingly. Technically you should only receive 3k per annum as a gift tax free but if you're married it can be 6k taking in that your hubby gets a gift as well but I would not bother too much of declaring it as it will not be much over that amount I would imagine (old houses need a lot of upkeep)
 

Feemar5

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Whoever owns the house is responsible for the tax. Re the gift tax you can €3000 from both your mother and father - it might be simpler for your father to pay the costs and claim them against the rental income. Depending on his age he may not have to pay U.S.C on the rent.
 

Bronte

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This is an extremely messy arrangement.

I woukd talk to a professional on this.
He doesn't need a professional, he needs to do what Feemar suggested. Very simple and doable. He can still manage the property for his father for free. And get 6K tax free from both parents.
 

NoRegretsCoyote

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He doesn't need a professional, he needs to do what Feemar suggested. Very simple and doable. He can still manage the property for his father for free. And get 6K tax free from both parents.
It's not simple. A few issues that spring to mind:
  1. Whose a/c is the rent being paid to? It would be important to establish a paper trail of transfers.
  2. Can the daughter bill the father for property management services? This would impact tax liabilities of both.
  3. Does the daughter have a partner? They could receive half of the rent to stay below gift tax thresholds. Gross rent is over €25k p/a, so gift tax thresholds are relevant here
  4. Likewise, is the mother a co-owner of the house? This would impact parents' tax liabilities and would also allow for the gifts to come from the mother as well as the father.
 

Bronte

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You're making it way too complicated. It doesn't matter where the physical rent went. The owner of the house declares the rental income as his. Not as a gift to child. Which would be a crazy way to do things. Then the father deducts the costs from his tax bill. And whatever is left he gives to the child, and if that's more than 3K, his wife gives the same amount. That's 6K tax free. And the child runs the rental business for free for the father in lieu of gettting tax free money.

OP should give us more figures:
Rent: 2200 = 26,400
Costs?
Amount taxable
Taxed at (what rate is the father at, and does he pay USC etc.)
Remainder to be gifted. And being smart about it. So 3K from each parent and if the OP has a partner, 3K from each parent to that partner. Which would be 12K.

Parents could also I suppose gift to other child, who could gift to this child but I think that might be tax evasion. So best not to go down that route. Does the OP have children !
 
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sue m

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Hi,

I do have a partner (not married) and one child. My father appears to think that I shold pay the tax but i have tried to explain that he is liable and he will have to pay it. He is semi retired..works as consultant and does he's his own tax returns.
 
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