Children could be set to benefit from inheritance tax break on parent’s homes

Children could be set to benefit from inheritance tax break on parent’s homes

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?

Have your say below…

There are 13 comments for this article
  1. Owen at 2:41 pm

    2 matters:
    1. Why has there been no publicity of the fact that lenders charge “penalty interest” on top of exorbitant interest, on arrears. They are unenforceable but lenders claim them and those involved do not have the resources to challenge them.

    2 Receivers are not accountable for sales and do not inform those involved of the sale proceeds or where the money goes. Carte blanche to the receivers. This should be changed to make receivers accountable to the owners.

  2. Pingback: Children could be set to benefit from inheritance tax break on parent’s homes | Rosalie Rodney
  3. Eugene Meagher at 2:14 pm

    Can i ask what happens to those who had to move house rent existing family home due to fall in property values and rent another property in the mean time until property values increase again. The result here is that families who wish to sell the family home at some point in the future are subject to capital gains tax at 33% on those years that it was rented. This is a significent impedidment for using any equity from the sale as a deposit on another house/family home.

  4. Rita at 12:33 pm

    Nieces and nephews should be exempt too. Not all people have their own children to leave an inheritance to so the same rules should apply to a niece or a nephew

    • caroline bennett at 12:35 pm

      THANK YOU

    • anthony j jenkins at 12:50 pm

      inheritance should be done away with completely, as in other countrys,it is a unfair tax,and doe,s a lot of demage to famileys,and small companys,

    • Geri Dunne at 1:08 pm

      I agree and IT should be abolished… Greedy Government as usual – they screw people with tax while living and that’s not enough… 😡

    • Liz at 7:11 pm

      Agree totally with Rita, as some people have Sisters/Brothers/Nieces and Nephews and should be exempt for those also.

    • Aisling at 11:41 am

      I agree as many of us save the state a lot by looking after our relatives- uncles, aunts and grand-uncles and grand-aunts, and when they want to leave you their house the state collects a huge chunk. So you save the state on carers etc and they take the reward. Society asks why people don’t look after there relatives but leave it to the state to do . You can understand the response why should they the state take so much of the estate any way. Older people don’t want to be a burden especially when the reward is diluted by an enormous tax bill.

  5. Caroline Bennett at 12:25 pm

    CAN I ASK WHAT HAPPENS IN THE CASE OF A SISTER LEAVING A BROTHER THEIR PROPERTY? BROTHER LIVES IN THE PROPERTY BUT DOES NOT OWN THE HOUSE.

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