tax on a monetary gift?

S

StaroftheSea

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Taken from Revenue.ie website:

"Various exemptions from gift and Inheritance Tax have been provided for. For example, the first €3,000 taken as a gift by a beneficiary from a disponer in any one year is exempt from tax as are gifts and inheritances taken by one spouse from the other."

Does this mean that I could receive several gifts of 3000 from different people and not pay tax on any of it?

Thanks,
 
If a scheme was setup to avoid gift tax eg A gives 3,000 to 20 people (tax-free) and then the 20 people give 3,000 to B (again tax-free) then this would probably be illegal as it effectively amounts to A giving 60,000 to B
 
ok jpd, but as a small tax avoidance measure, both parents could give 3000 each to me yearly, and I wouldn't have to pay tax on it?
 
There is a much higher tax free limit for parent to child transfers. About 400k I believe.
 
StaroftheSea said:
ok jpd, but as a small tax avoidance measure, both parents could give 3000 each to me yearly, and I wouldn't have to pay tax on it?
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Yes, that's correct.

greentree said:
There is a much higher tax free limit for parent to child transfers. About 400k I believe.
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That is true, but anything above 3,000 per year per parent reduces this tax free limit for subsequent gifts and inheritances. Also the limit is MUCH smaller for gifts from anybody else, other than parents, and these gifts are cumulative. So an earlier gift from a parent is going to reduce or eliminate the amount that can be receive tax free from an uncle, a sibling or anyone else (and unmarried partner counts as a stranger).

So all in all, it is wise to receive 3,000 per year from each parent, rather than 6,000 from only one parent, or receiving nothing for a number of years and then a larger gift or inheritance.

I used it myself years ago, only then the annual tax free limit was ridiculously low at 1,000 pounds, so both parents gave 1,000 each to me and 1,000 to my husband:)
 
As many things in life, it's very important to choose your parents well :-()
 
Greta said:
the limit is MUCH smaller for gifts from anybody else, other than parents, and these gifts are cumulative.
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Yup, I agree.

Greta said:
So an earlier gift from a parent is going to reduce or eliminate the amount that can be receive tax free from an uncle, a sibling or anyone else (and unmarried partner counts as a stranger).
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Nope, I don't think so? AFAIK an inheritance/gift in a particular Group (for any benefits taken on or after 5th December 2001) only uses up the threshold for that particular Group. So a gift of €100k from a parent doesn't use up the threshold for gifts/inheritances from strangers.

http://www.revenue.ie/en/tax/cat/aggregation-rules.html

But still, I agree 100% with the advice given - that's common sense! And don't I wish my parents were in a position to do it!
 
I am retired with 200,000 on deposit in an Irish bank. My daughter has a 20-year mortgage of 175,000 and can't afford the repayments. I would like to lend her the money to pay off her mortgage and let her repay me at about 3% interest instead of 6%. Can I do this without problem of gift tax - I would of course pay tax on any interest?
 
billdavies63 said:
I am retired with 200,000 on deposit in an Irish bank. My daughter has a 20-year mortgage of 175,000 and can't afford the repayments. I would like to lend her the money to pay off her mortgage and let her repay me at about 3% interest instead of 6%. Can I do this without problem of gift tax - I would of course pay tax on any interest?
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Look up revenue.ie http://www.revenue.ie/en/tax/cat/guide/free-property-loans.html
Not sure what the "commercial rate of interest" will be in your case, 6% that your daughter is paying or something else set up by the Revenue, but basically the difference between what her repayments would have been at "commercial rate" (let's say 6%, but not sure) and the actual rate you'll be charging her (3%), will be considered a gift for tax purposes.

However, if your daughter has not received any gifts in excess of 3,000 euro per year per donor from anyone, then gift tax will not be payable for a long time, as there is a high threshold for gifts/inheritances from parents, below which no tax is payable.

Also first 3,000 euro per year are exempt from gift/inheritance tax, so if this amount falls below 3,000, this annual "gift" will not count towards reducing the remaining threshold for tax-free gifts/inheritances.

If the amount is above 3,000 euro per year, then only the excess above 3,000 will count towards reducing the tax-free threshold.

If you could give your daughter the loan half to her and half to her husband, if she is married, then the amount of annual "gift" that is exempt from tax will double from 3000 to 6000.

The same effect can be achieved if the daughter receives the low-interest loan from both parents rather than from just one.

I think your daughter will lose mortgage interest relief, if she still gets it, as it's probably not available on loans from parents. So this is something to consider. It might be better to just help her by 3,000 euro per year (which will not count towards reducing inheritance threshold) until her relief runs out.
 
Could you and spouse set up monthly Direct Debit of 250 euros each to your daughter thereby reducing her repayments by 500 euros per month. Perhaps this would bring the mortgage to a manageable level for her and avoid any tax implications for both of you
 
Sorry for probably asking a question whereby the answer is obvious (but even after reading the info on the revenue website I'm still unclear!!)

If I receive a gift of 3K from my parent, I know from reading here it doesn't accumulate towards the transfer limit, but do I need to complete any forms for Revenue regardless?

Thanks in advance
S.
 
If you haven't received gifts or inheritances equal to 80% or more of the parent to child threshold (currently approximately 332K), then no return or submission should be required in the circumstances you describe.
 
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