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Parent lending me €20000 which I will be paying back

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  • 04-07-2023 7:13pm
    #1
    BobbyT28
    Registered Users Posts: 1,439 ✭✭✭


    Hi,

    My parent is lending me 20k to buy a car, I will be paying them back monthly, interest free. Will this be liable for any tax implications? only doing this as don’t want to pay €3.5k in interest on an already approved loan.


    Also, is it ok for him to just lodge it into my account?


    edit,

    never received any money for them before.

    Thanks in advance

    BobbyT28



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    #2
    ax530
    Registered Users Posts: 463 ✭✭ax530


    Should be fine well within the limited of allowance allowed from parents before tax due. ( Think it 250-300k) you do not need to declare unless it within a certain % of the limit.

    Guess bank will ask where it came from



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    #3
    Padre_Pio
    Registered Users Posts: 4,961 ✭✭✭Padre_Pio


    https://www.boards.ie/discussion/comment/120805422#Comment_120805422

    Should be fine, bank might ask, but probably won't.

    My parents gifted me 25k and it was fine.



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    #4
    CramCycle
    Moderators, Sports Moderators Posts: 24,523 Mod ✭✭✭✭CramCycle


    Mine gifted me the same for a home loan, the bank didn't even ask where it came from. I wouldn't worry to much. Someone can correct me if I'm wrong, if you are paying them back it's a loan and not a gift but I can't see it being noticed let alone flagged.



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    #5
    BobbyT28
    Registered Users Posts: 1,439 ✭✭✭BobbyT28


    Cheers for the clarification. We are in the same credit union so just a matter of transferring between accounts. We have agreed to pay it back using direct debit every month. Will this be an issue?



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    #6
    z80CPU
    Registered Users Posts: 567 ✭✭✭z80CPU
    Darth Randomer


    It shouldn't be. Dad (RIP Dec 2022) had lent money to my sibling a few years ago. Dad was with AIB, and so is my sibling. AIB didn't raise anything.



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    #7
    SureYWouldntYa
    Registered Users Posts: 7,724 ✭✭✭SureYWouldntYa


    As you are paying it back as a loan, but not paying any interest on the loan, the interest forgone would be deemed a gift from your parent to you

    A person can give any other person €3k tax free every year, so this will cover any potential liability for Capital Acquisitions Tax purposes from an interest perspective

    There is no need for the full €20k to be declared a gift with Revenue if you are paying it back, it would be a waste of the €335k Group A allowance from your parent(s)



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    #8
    Peregrinus
    Registered Users Posts: 26,160 ✭✭✭✭Peregrinus


    Tax consequences are basically negligible.

    Lets say you're going to pay back the loan over 2 years. If your father put 20k on deposit for two years, these days he would get interest of about 1.5% per annum. Instead, he's giving you an interest-free loan. The benefit to you is the value of the interest he is foregoing - about €300 per year, so he is treated as making a gift to you of €300 in the first year, and about €150 in the second year (because by year two half the loan has been paid off). That's well within the small gifts exemption of €3,000 per year, so no tax and no need to file a return.

    Suppose you don't pay back the loan and at a certain point he forgives the loan and writes it off. At that point he is making a gift to you of €20,000. That's outside the small gift exemption. But he's your father, and you can get a lifetime total of €335,000 from your parents before you have any liability to tax on gifts from them. So, assuming you haven't already received large gifts or inheritances from your parents, still no tax. The only consequence is that you will have used up some of your €335,000 lifetime allowance for gifts and inheritances from your parents — another €315,000 and you'll have a tax liablity.



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