Rent written off as "inheritence/gift" ...CAT?

Dee1401

Hi, I'm just wondering if anyone has been in the position of living rent free in a parents house and went down the road of declaring it as a gift towards the €310,000 inheritence allowed as an exemption to Capital Aquisitions Tax?I don't even know where to start with it!Haven't moved in yet bit want to make sure neither myself or my parents will get landed with some huge tax bill if we go ahead with it!Thanks in advance!

JamBur

Dee1401 wrote: »

Hi, I'm just wondering if anyone has been in the position of living rent free in a parents house and went down the road of declaring it as a gift towards the €310,000 inheritence allowed as an exemption to Capital Aquisitions Tax?I don't even know where to start with it!Haven't moved in yet bit want to make sure neither myself or my parents will get landed with some huge tax bill if we go ahead with it!Thanks in advance!

Surely living in the family home is no business of the Irish revenue system. Only when it changes hands do they have any input (or at least that's my basic understanding)

Dee1401

Sorry I should have specified- it's not the family home it's another property owned by my parents which I would be living in rent free! As far as I am aware the motetary value of the monthly rent we don't pay has to be declared and deducted from the 310,000 allowed inheritance/gift before CAT is payable?But it seems very unclear!Thanks for your response!

Larbre34

You'd be a mug to touch that exemption with anything less than hard transactions for real cash, e.g. a contribution of a few K towards a holiday or car of yours etc.... And even then...

If by some remote chance they do ask down the line, tell them you transacted your rent in cash and chores between family and neither have a record of it.

TomOnBoard

Are you going to be living in it rent free as the sole occupant or sharing with others? What is the market value of the property?

Dee1401

I'd be the sole occupant, wouldn't know market value off the top of my head but nothing major -rent would be in the region of 600-650 p/m if I were to rent it from a landlord!

wildwillow

I'd be worried that your parents would be taxed on a notional tax for the rent even if you are not paying anything. Also how does it affect their pension entitlements. You need advice from an accountant at the very least.

Dee1401

Yeah I think you're probably right...it's great in theory but want to be sure they're not going to get nailed in some other way if I did go ahead with it!

TomOnBoard

Note: This is not professional tax advice... Application of common sense follows. Get a professional to validate...

If the property is held in joint ownership by both your parents, then each of them can gift you €3k p.a. under the small gift exemption. That's 6k dealt with. Thats, ammmm, 500 a month... Seems a fair rental to me to get a tenant with phenomenal references, oooooozing respect for landlords and property, no issues around anti-social behaviour etc.......

Taxuser1

You only declare gifts or inheritances where they exceed 80% of the tax free threshold, in your case 80% of 310,000 parent to child. You have an annual gift exemption of 3 grand which you can receive tax free. Revenue apply a formula based on market value of the property and annual market rent to determine what the tax implication of living rent free might be. Its quite low and based on your market rent identified it might jot be too much more over thr annual tax free amount. And all of that aggregates until such time as they perhaps leave the house to you and you then do have a tax issue for the built up tax free amount you will have taken.

Revenue have policies on circumstances where parents provide for their kids for education purposes, but provision of a house is thought outside of that, just in case you were a student and the parents bought the house for that purpose.

Taxuser1

As Tom said, 3000 per parent