Renting to parent

irishguy

Can anyone tell me of my tax obligations (if any) if I purchased a house and rented it at cost to one of my parents?
Basically they are unable to get a mortgage and I would be putting up the deposit and they would be paying the mortgage (which would be in my name solely)

gerrybbadd

irishguy wrote: »

Can anyone tell me of my tax obligations (if any) if I purchased a house and rented it at cost to one of my parents?
Basically they are unable to get a mortgage and I would be putting up the deposit and they would be paying the mortgage (which would be in my name solely)

Are they renting a room or the whole premises?

There are no special concessions for renting to your parents. You'd be liable to the normal taxes due, if renting the whole house to them

irishguy

gerrybbadd wrote: »

Are they renting a room or the whole premises?

There are no special concessions for renting to your parents. You'd be liable to the normal taxes due, if renting the whole house to them

They would have the place to themselves.

Well I assume if I buy the place and they stay there then it's fine there would be no liability?

They would also be allowed to give me a gift up to €310,000 + €3,000 per year

The market rent per year would be C. 6k

Lockedout2

If they pay you for staying in a house belonging to you how is that a gift????

It's rent.

irishguy

Lockedout2 wrote: »

If they pay you for staying in a house belonging to you how is that a gift????

It's rent.

Well there is no definition of a gift on the revenue site. So presumably they can give me money for no reason whenever they want (as long as its within their limits).

They should be really clarify as to what they mean as a gift.

gerrybbadd

irishguy wrote: »

Well there is no definition of a gift on the revenue site. So presumably they can give me money for no reason whenever they want (as long as its within their limits).

They should be really clarify as to what they mean as a gift.

A gift is no conditions attached.

They are paying you money in exchange for the roof over their heads. Its quite clear

Mr. Incognito

Well there is no definition of a gift on the revenue site

Lol.

There is in the CAT Legislation. The Revenue Website is not legislation.

Knock yourself out http://www.irishstatutebook.ie/eli/2003/act/1/enacted/en/html

You are providing a house. They are paying you rent.

If you want to classify the rent as a "Gift" then they are getting the benefit of a rent free house and have to pay CAT on that "Gift" to Revenue. So they will have to pay your rent and also CAT on the "rent free" accomodation.

There are also very strict anti avoidance sections in the legislation to counter act this type of hair brained application of the tax law. It attracts all sorts of creative ideas from people to circumvent tax law and most loop holes you could think of and some you could not are all covered off.

And, of course, if you use up your thresholds you will get hit with inheritance tax down the line.

There are of course legitimate tax effective ways to structure this. But go speak to an advisor. This isnt a free advice shop.

Mr. Incognito

Mr. Incognito wrote: »

And, of course, if you use up your thresholds you will get hit with inheritance tax down the line.

There are of course legitimate tax effective ways to structure this. But go speak to an advisor. This isnt a free advice shop.

If the ops parents can't afford the deposit for a house I doubt he will be inheriting too much from them.

I didn't see anything about them living there rent free but rather paying the full amount of the mortgage. I'd imagine with the help of a tax adviser the yearly mortgage cost could be gifted to the op from his parents all above board. 6k small gift exemption would (3k from each parent) would save a good chunk of the life time threshold every year and it would take a long long time to use up the full parent to child threshold (51 years in fact if we made a rough estimate that mortgage was about 1k per month = 12k per year, only 6k would be using threashold every year).

Mr. Incognito

Mavis Poor Pulp wrote: »

If the ops parents can't afford the deposit for a house I doubt he will be inheriting too much from them.

I didn't see anything about them living there rent free but rather paying the full amount of the mortgage. I'd imagine with the help of a tax adviser the yearly mortgage cost could be gifted to the op from his parents all above board. 6k small gift exemption would (3k from each parent) would save a good chunk of the life time threshold every year and it would take a long long time to use up the full parent to child threshold (51 years in fact if we made a rough estimate that mortgage was about 1k per month = 12k per year, only 6k would be using threashold every year).

You imagine wrong. Rent is not a gift.

If you classify it as a gift they are not paying rent.

If they are not paying rent they have a rent free house.

Living in a rent free house levies a charge to CAT.

Mr. Incognito

Mr. Incognito wrote: »

Living in a rent free house levies a charge to CAT.

6k will be exempt every year under the small gift exemption. If the op puts the house in joint names that's 12k per year the parents can receive so would likely mean the parents would not have to pay any CAT.

As I said, the advice of a good tax advisor is required they will work out the most tax efficient way to structure everything and I'd be surprised if this can't be structured in a way that no one is paying any tax in the medium to long term.

Lockedout2

The OP can let his parents stay rent free.

The OP can charge his parents rent and pay down the mortgage.

The OP can let his parents stay rent free. The parents can "gift" him the amount of the mortgage but that won't get away from the fact that it's clearly rent and should be assessed as such.