Children who inherit property from their loved ones may be set for a tax break from the new Government.
According to a report in today’s Irish Times, tax changes promised in the Government programme for partnership will be sharply cut or eliminated completely.
Under the changes, once they are implemented, children inheriting the family home will not pay tax on the first €500,000 value of the estate, which should mean the majority of bequests will not prompt tax demands.
However, while the Government is planning to raise the threshold, it is not proposing to cut the 33 per cent tax rate applied to bequests over the threshold. This rate increased in 2009 from 20 per cent.
In the last budget, Minister for Finance Michael Noonan increased the thresholds – which had fallen after the economic crisis broke in 2008 – from €225,000 to €280,000.
However, given the rise in the price of property in recent years – particularly in urban areas such as Dublin – this meant that families were left with large tax bills following the passing of their loved ones.
While the increase to €500,000 will take many out of the firing line, those who are left more expensive properties will still pay inheritance tax, albeit on a lesser amount than they would have up to now.
In its manifesto, Fine Gael said: “We will improve the tax treatment of gifts and inheritances from parents to young adults, by increasing the capital acquisitions group-A threshold to €500,000.”
In a nod to the new arithmetic in the Dáil, the Government programme for partnership emphasises the need for cross-party agreement.
“Finally, we will work with the Oireachtas to raise the band-A capital acquisitions tax threshold (including all gifts and inheritances from parents to their children) to €500,000,” it says.
However, the Government will not change the thresholds that apply to bequests given to or by brothers or sisters, uncles or aunts, or grandparents – nor the smaller thresholds for people who are not related.
The tax-free threshold for those belonging to “group B” – a parent, brother, sister, niece, nephew or grandchild, will remain at €30,150. Similarly, “group C”, all other relationships, will inherit €15,075 tax-free. The threshold covers all bequests cumulatively. A senior Fine Gael source said there were no plans to raise the threshold of non-parental gifts, as the “main political issue” was family homes generating substantial tax liability when passed on.
The inheritance tax thresholds have been a sore point for some time. In 2009 a parent could leave each son or daughter €542,000 without them paying tax but this sum has fallen steadily over the years to as little as €225,000 in 2012.
This meant that some children were forced to sell the family home to meet the inheritance tax liability.
Let us know what you think of the proposed changes.
- Would it make a difference to you in your situation?
- Do the proposed changes go far enough?
- Have you suffered as a result of the rate falling in the last seven years?
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