Monday 19 February 2018

The 60-second guide to... what you can pass onto kids tax-free

Finance Minister Michael Noonan TD Picture: Tom Burke
Finance Minister Michael Noonan TD Picture: Tom Burke

The tightening up of the rules around the dwelling house exemption come about two years after Finance Minister Michael Noonan, pictured, tinkered with other gift tax rules, which made it more difficult for adult children to get tax-free digouts from their parents.

Before December 2014, parents could pay for the support, maintenance or education of their children without triggering a tax bill for their child - regardless of how old that child was.

However, in December 2014, the Government tightened up the law around gift tax so that only children under the age of 18, permanently incapacitated children, or those in full-time education and not more than 25 years of age, are exempt from tax on such financial support. Furthermore, the financial support given by parents to such children must be viewed by Revenue as "normal" for it to be exempt from tax.

Revenue considers the payment of college fees and accommodation costs for a dependent child attending college (who is not more than 25 years of age) to be "normal" and therefore exempt from gift tax.

However, the purchase of a house for a child would not be considered normal and would therefore not be exempt from gift tax.

Another gift which would not be exempt from tax is money given to a child towards a deposit for a house - where the sum of money given by a parent is more than €3,000 in a given year.

Should you decide to pay for the cost of your child's wedding, Revenue would consider this an expense rather than a gift and so no gift tax would arise.

However, should you give your child a wedding gift such as a car, a house or a paid holiday, it is viewed as a gift - and so a gift-tax bill could arise.

Remember, despite the rule changes, your son or daughter can still inherit or receive tax-free gifts from you worth up to €310,000 over their entire lifetime.

Sunday Indo Business

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