Families caught in inheritance tax trap
Published 08/06/2015 | 02:30
Thousands of families are being unexpectedly hit with huge inheritance tax bills this year as rising property prices push them over exemption limits.
Finance Minister Michael Noonan is to examine the issue around the inheritance tax trap, which is forcing many to sell their parents' homes in order to settle their tax bills with the Revenue Commissioners.The tax rate for inheritance sky-rocketed during the recession, while the threshold for tax-free inheritance was halved.
However, with property prices rising, ordinary families are getting hit by a tax only intended to target those in receipt of exceptionally large inheritances.
Tax and legal experts have called for a radical overhaul of inheritance tax - known by Revenue as capital acquisitions tax.
Back in 2009, a child could inherit €542,544 from a parent, and the balance was taxed at 22pc. However, now a child can inherit only €225,000 from a parent before the balance is taxed at 33pc.
Smaller families, where there are few people sharing in the inheritance of a property, end up being hit hard by enormous inheritance bills.
Experts say the system is "one of the toughest inheritance tax regimes in the world".
The reduction in the tax-free thresholds has resulted in even modest properties - particularly in Dublin, where house prices are higher - being hit with big tax bills when transferred from parents to offspring,
Farmers and business owners passing on their assets get reliefs worth up to 90pc of the value of the assets they are leaving to loved ones. But this doesn't apply to ordinary families, where the home is being passed on.