Home Economics: Answering your property questions
Personal Finance expert Sinead Ryan answers your property questions.
Q. My husband and I bought a house in Dublin last year for our daughter, hoping to avail of the tax loophole which allows her to inherit it tax free if she lives there for two years. We also took in two tenants, but haven't declared the income. Is our daughter able to avail of the rent-a-room relief or is there tax due? We haven't registered with the RTB either and don't have a mortgage on the house.
Answer: I have good news and bad. The 'loophole' you refer to is Dwelling House Relief, which allows a son or daughter inherit a house free from Inheritance Tax if they have lived there for a number of years prior to its disposal. However, Barry Flanagan, tax expert with Taxback.com says this was discontinued in the last Budget by Michael Noonan amid accusations it had been used as a tax avoidance measure by the wealthy, rather than as intended.
"It still applies to inheritances in some very limited circumstances but, unfortunately, it would not be available in the circumstances described by you", he says. The lifetime allowance parents can gift a child is currently €310,000, with anything over that attracting tax at 33pc. If your daughter is not paying rent to you (your letter doesn't say), then this omission might also be deemed a 'gift' to her, based on open market rates, and will need to be taken into account within the cap.
In terms of the tenants, I'm presuming you mean you took them into the house your daughter lives in, rather than your own home. You cannot avail of the rent-a-room relief on this, as it is not your principal residence, but your daughter, with your permission, can.
However, in order to gain the relief (currently a maximum of €14,000 pa), she will need to be fully tax compliant. I say this only because if she is not paying rent to you, then such a gift will become apparent to Revenue. There's nothing wrong with it, but the €310,000 limit is calculated over her entire life, including inheritances after you both pass. You are, however, both allowed gift her €3,000 each (€6,000) per year under the Small Gifts Exemption, which will go some way toward alleviating what rent she would pay.
Q. My mother is in a nursing home under the Fair Deal scheme. While we're happy with it, we are being charged top-up fees separately. She gets a regular chiropody treatment and my sister asks for the hairdresser to visit every month. In addition, we are paying €150 p.m. extra toward 'entertainment', which isn't incorporated in the scheme. Can we claim any of this back on tax?
Answer: The Nursing Home Support Scheme (Fair Deal) charges 80pc of a person's income along with 7.5pc per annum of their assets as a contribution toward their care. They should never pay more than the nursing home costs, but this is based on the base 'fee' charged.
Separately, anyone is allowed claim tax back at the standard rate (20pc) toward medical bills. However, Revenue's allowable expenses are quite clear. They state: "The maintenance or treatment expenses incurred must be in association with the services of a practitioner or in connection with diagnostic procedures carried out on the advice of a practitioner."
Practitioner means medical practitioner. So, for example, a physiotherapist would qualify, but not a hairdresser. A chiropodist potentially comes within the definition, so call your local Revenue office on this. The "entertainment" fee, which many nursing homes charge is generally for things like music evenings, bingo or art classes, which your mother may or may not attend. It would not be allowable.
The Ryan Review
There are many things we Irish aren't suited to - the sun, for instance. Or snow. We're not great at sobriety or being told what to do. And we really, really don't like living in flats.
Recent research from the European Commission shows we're actually the worst in Europe at it. While 40pc of our counterparts see apartment living as not just normal, but desirable, Ireland comes in at less than 10pc, bottom of the list. What we really want are semi-detached houses and here we score highest - 51.6pc.
My own suspicion places the blame on the Irish mammy (I am one, so this is okay). Renting is really a thing only students or those down on their luck put up with. We see an apartment as being grand for staying in on your holidays, but living in one is surely a temporary arrangement until you find a nice girl/boy and settle down. IPAV, the estate agents' body, claims it's to do with building input costs. Hefty new regulations on dual aspect windows, energy costs and access to credit for big scale developments, like apartment blocks, remains challenging.
The Government claims that the majority on housing waiting lists are singletons (they are). However, even they don't want one-bed apartments. They want a front and back garden.
Aside from the practical, the mindset needs to change. Perhaps this generation of 20 and 30-somethings will be the ones to do it. But how many consider themselves 'stuck' with an apartment, considering it transitional. And how many of our pensioners seriously want to trade down to one in retirement? The next decade will make that clear.