Inheritance tax

Shamboo1801

Myself and my brother have inherited our parents house. My brother is going to give my nephew, his son, his half of the house as he wishes to move in there. My nephew is then going to buy my half off me. Are there tax implications for me as I will only be selling half a house?

4ensic15

Shamboo1801 wrote: »

Myself and my brother have inherited our parents house. My brother is going to give my nephew, his son, his half of the house as he wishes to move in there. My nephew is then going to buy my half off me. Are there tax implications for me as I will only be selling half a house?

It depends. You may have CAT on the inheritance depending on the value of cumulative value of the inheritance and any reckonable gifts. There may be CGT in some circumstances. You should speak to a professional estatpe planner/ tax adviser. There may be ways to legitimately reduce your tax bill if you take the correct action in the early stages.

voluntary

There should not be inheritance tax (parent to child) unless you're over the free inheritance limit. There may be however capital gains tax to be paid depending on when the inheritance took place.
I think you need to establish a value of the house (half of the house in your case) at the time of inheritance then establish the value of the house at the time of selling. If the later is higher than whatever difference you made is the capital gain.

Shamboo1801

voluntary wrote:

There should not be inheritance tax (parent to child) unless you're over the free inheritance limit. There may be however capital gains tax to be paid depending on when the inheritance took place. I think you need to establish a value of the house (half of the house in your case) at the time of inheritance then establish the value of the house at the time of selling. If the later is higher than whatever difference you made is the capital gain.

So for sake of argument, the house is inherited this week, and I start the process of selling my half to my nephew next week, the capital gains should be minimal?

voluntary

Shamboo1801 wrote: »

So for sake of argument, the house is inherited this week, and I start the process of selling my half to my nephew next week, the capital gains should be minimal?

Should be none if you're selling withing a year or so in my opinion. I'm not an accountant though so the other poster's suggestion to ask specialist may be worth considering.

Capital acquisitions tax threshold when a child receives a gift or inheritance from a parent is €320,000. If the house value is €640k or less you and your brother should have no tax liability.

If he gives his half to his child the same threshold applies, so no tax liability. You would be selling your half of the house to him though, and this may be liable to tax depending on the circumstances. Best to talk to a tax adviser.

Shamboo1801

downtheroad wrote:

Capital acquisitions tax threshold when a child receives a gift or inheritance from a parent is €320,000. If the house value is €640k or less you and your brother should have no tax liability.

downtheroad wrote:

If he gives his half to his child the same threshold applies, so no tax liability. You would be selling your half of the house to him though, and this may be liable to tax depending on the circumstances. Best to talk to a tax adviser.

Great stuff. Thank you all for your help and advice.

voluntary

One more thing to consider. As this is your family you may be tempted to sell below the market value. If you sell below market value then the difference between the transaction price and the market value may be considered a gift to your nephew.

Shamboo1801

voluntary wrote:

One more thing to consider. As this is your family you may be tempted to sell below the market value. If you sell below market value then the difference between the transaction price and the market value may be considered a gift to your nephew.

Oh there'll be no below market value selling. This will be for my own daughters inheritance, hopefully a long way away, so the deal was that it will be split evenly down the middle. An arrangement we're all happy to agree with.

jimmycrackcorm

downtheroad wrote: »

If he gives his half to his child the same threshold applies, so no tax liability. You would be selling your half of the house to him though, and this may be liable to tax depending on the circumstances. Best to talk to a tax adviser.

I'd question this. There's an annual limit on the value of a "gift" iirc.

Shamboo1801

jimmycrackcorm wrote:

I'd question this. There's an annual limit on the value of a "gift" iirc.

House is worth roughly 400k so it's just a straight split. I thought that if he gives this to his son, it just goes against any future inheritance he may receive.

jimmycrackcorm

jimmycrackcorm wrote: »

I'd question this. There's an annual limit on the value of a "gift" iirc.

There's an annual limit of €3,000 on a gift to any person.

However from Revenue website (https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds-post-november-2011.aspx)
CAT thresholds (post November 2011 to date)
Group A: A son or daughter of the person giving the gift or inheritance (the disponer) €320,000.

You do not have to pay tax on a gift or inheritance if its value is below a particular group threshold. The threshold you use depends on your relationship to the person who gave you the gift or inheritance. You must pay tax on any remaining value above that threshold. There are three group thresholds.

Group A: The person receiving the gift or inheritance is a child of the person giving it. This includes adopted children, step children and some foster children.

mrslancaster

OP afaik there could be Capital Gains Tax CGT due by you if you sell for more than the value of the house on the date you inherited it.

So say your share was valued at €200k when you inherited and you later sell for €250k then there's a gain of €50k. There's a small allowance & any selling or legal costs can be offset and tax is due at 33% on the balance. CGT payment is due to Revenue around oct in the year of sale iirc.

As downtheroad said, no inheritance tax CAT due up to €320k from parent to child.

Our case was the value at date of parents death was x. By the time the probate went through the value had gone up. The "estate" had made the gain so the solicitor had to pay over the CGT and then the balance was divided to the family. I found it a bit confusing because there's two different kinds of tax involved.

The CGT is the one to watch out for. It can be due before the inheritance is received and then also if there is any gain if the inheritance is disposed of at a later date.

4ensic15

downtheroad wrote: »

There's an annual limit of €3,000 on a gift to any person.

However from Revenue website (https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds-post-november-2011.aspx)
CAT thresholds (post November 2011 to date)
Group A: A son or daughter of the person giving the gift or inheritance (the disponer) €320,000.

You do not have to pay tax on a gift or inheritance if its value is below a particular group threshold. The threshold you use depends on your relationship to the person who gave you the gift or inheritance. You must pay tax on any remaining value above that threshold. There are three group thresholds.

Group A: The person receiving the gift or inheritance is a child of the person giving it. This includes adopted children, step children and some foster children.

Gaifts and inheritances are cumulative. An indvidual gift may be below the threshold but if there have been previous gifts they will be added on and thus the threshold may be exceeded.

4ensic15

Shamboo1801 wrote: »

So for sake of argument, the house is inherited this week, and I start the process of selling my half to my nephew next week, the capital gains should be minimal?

The date of inheritance is the date of death normally. It is unlikely you would be in a position to sell a week after death. Probate has to be taken out etc.