Capital Acquisition Tax - 3k vs 335k thresholds?

brio09

Hi!
I read through a few posts about CAT and also read the revenue website but have a basic confusion since there are multiple thresholds mentioned.
There is a 3k threshold of tax-free gift from anyone.
there is a 335k lifetime tax-free gift threshold from my parents.

I am confused about when the 3k limit applies vs when the 335k limit applies.

- if parents keep sending 3k every year, will that count or not count towards 335?

- if parents give 335k in 2021 and 3k in 2022. will the 3k not be taxed although the total is above the 335k limit?

- there is no impact of when a parent passes away, correct? because it is just the terminology that changes from "gift" to "inheritance". otherwise, all calculations are the same. (my parents are healthy and happy and I'm glad about that! but the gift vs inheritance confused me too)

TIA!

brio09

actually i found some answers for this - https://www.revenue.ie/en/gains-gifts-and-inheritance/documents/cat-treatment-receipts-by-children.pdf - the answer is "no" to the first question and
- probably "yes" to the second.
- and the small gift exemption doesn't apply in last 2 years of the gift giver's lift. correct?
hope sharing the link and summarizing my understanding helps anyone else too who comes across this

ari101

Gifts / inheritances are both liable to the same tax (CAT); if you use the 335k lifetime allowance for a gift now, and there was an inheritance from parents at some stage (in the long distant future), that inheritance would be taxable full.

Think of it as:
-the first 3k/parent/year is tax free (6k possible from 2 parents) regardless of whether the threshold has been met
-any other gift or inheritance will be taxable once cumulative lifetime total reaches 335k

E.g. using 1 parent gift (3k, rather than possible 6k)
2021 3k or less received, no tax due, full 335k remains
2022 300k received, less 3k, use 297k of allowance, no tax due, 38k remains
2023 3k or less received, no tax due, 38k remains
2024 50k received, less 3k, use remaining 38k allowance, tax due on 9k
2025 10k received, less 3k, tax due on 7k
2026 3k or less received, no tax due
...anything over 3k per year per parent will be taxable thereafter

La la lopsy

Also the 3k annually allowed is a gift allowance not an inheritance allowance. So if parent dies snd leaves an amount the 3k is not allowed against that amount.

brio09

La la lopsy wrote: »

Also the 3k annually allowed is a gift allowance not an inheritance allowance. So if parent dies snd leaves an amount the 3k is not allowed against that amount.

ah so thats a difference between gifts and inheritances - thanks!

brio09

ari101 wrote: »

Gifts / inheritances are both liable to the same tax (CAT); if you use the 335k lifetime allowance for a gift now, and there was an inheritance from parents at some stage (in the long distant future), that inheritance would be taxable full.

Think of it as:
-the first 3k/parent/year is tax free (6k possible from 2 parents) regardless of whether the threshold has been met
-any other gift or inheritance will be taxable once cumulative lifetime total reaches 335k

E.g. using 1 parent gift (3k, rather than possible 6k)
2021 3k or less received, no tax due, full 335k remains
2022 300k received, less 3k, use 297k of allowance, no tax due, 38k remains
2023 3k or less received, no tax due, 38k remains
2024 50k received, less 3k, use remaining 38k allowance, tax due on 9k
2025 10k received, less 3k, tax due on 7k
2026 3k or less received, no tax due
...anything over 3k per year per parent will be taxable thereafter

perfect, thank you for explaining!

Bass Reeves

brio09 wrote: »

perfect, thank you for explaining!

As well parents can gift money to grandchildren and to spouses. The 3k gift allowance can be gifted to complete strangers.

If a child had a partner and two children his parents could both gift the child his partner and two children 3k each. That is 6k to each person do 24k from parents so that family unit

brio09

Bass Reeves wrote: »

As well parents can gift money to grandchildren and to spouses. The 3k gift allowance can be gifted to complete strangers.

If a child had a partner and two children his parents could both gift the child his partner and two children 3k each. That is 6k to each person do 24k from parents so that family unit

i've been trying to understand the logistics of gifting children.
e.g. my parents want to gift my son who is too young to have his own account. I am trying to see whether they can give a signed letter that the gift is for him (i.e. not me or my SigO) and I can have a separate savings account in our name but keep just money for my son in it. so that when he turns 7, i can create an account for him and transfer it to him under his name. goal is to understand how my son's grandparents can gift him without us incurring taxes.
any suggestions on this? lemme know if it is a separate topic

Bass Reeves

brio09 wrote: »

i've been trying to understand the logistics of gifting children.
e.g. my parents want to gift my son who is too young to have his own account. I am trying to see whether they can give a signed letter that the gift is for him (i.e. not me or my SigO) and I can have a separate savings account in our name but keep just money for my son in it. so that when he turns 7, i can create an account for him and transfer it to him under his name. goal is to understand how my son's grandparents can gift him without us incurring taxes.
any suggestions on this? lemme know if it is a separate topic

Let you parents open a joint account for him in there names. One by each grandparent

brio09

Bass Reeves wrote: »

Let you parents open a joint account for him in there names. One by each grandparent

although son's grandparents are outside Ireland, I could create a joint account with me if that is allowed. i thought i cannot add name of our son on an account below 7 yrs of age?
thanks for the tip!
i searched and seems BoI's Childsave account could be an option. I'll search more on that front - I hadn't searched for joint accounts specifically.


on the tax front - if i create a joint account - will the gift count towards my gift CAT-free limits or towards my son's gift CAT-free limits?

Bass Reeves

brio09 wrote: »

although son's grandparents are outside Ireland, I could create a joint account with me if that is allowed. i thought i cannot add name of our son on an account below 7 yrs of age?
thanks for the tip!
i searched and seems BoI's Childsave account could be an option. I'll search more on that front - I hadn't searched for joint accounts specifically.


on the tax front - if i create a joint account - will the gift count towards my gift CAT-free limits or towards my son's gift CAT-free limits?

I think you can create a joint account in a child name with you just having signing rights. As a child under 7 cannot have an account in his own name I imagine that as long as you don't draw money out of the account there should be no issues

You really need an accountant to advise. Even ring revenue and ask the question. Try the financial advise section of boards

brio09

Bass Reeves wrote: »

You really need an accountant to advise. Even ring revenue and ask the question. Try the financial advise section of boards

makes sense - thanks, will search in the fin ad. sections of the board and message revenue

brio09

brio09 wrote: »

makes sense - thanks, will search in the fin ad. sections of the board and message revenue

not to discount your other suggestion of accountant - my situation is rather complex and i've talked to ~4 tax advisors, ~2 financial advisors, ~3 investment advisors, but some questions are at the intersection and many of them haven't given good answers or redirected to someone else.