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Gift tax on mortgage application.

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  • 10-11-2020 6:13pm
    #1
    Brego888
    Registered Users Posts: 1,314 ✭✭✭


    My partner recently received a lump sum of €50,000 inheritance which she used to pay off some of our mortgage.
    We are in the process of doing a mortgage switch and filling out a gift certificate to reflect where the money came from.

    My question is is there any tax compliance issues here? Someone suggested to me that I might have to pay gift tax as essentially this money has gone to a joint account mortgage and as I am not a family member the threshold for gift tax is different.
    I've looked up the revenue site but it's unclear how it would affect my situation.


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    #2
    dotsman
    Registered Users Posts: 3,635 ✭✭✭dotsman


    Hard to say without more details.

    Are you and your partner married or in a civil partnership?

    If so, everything should be ok. Your partner may have to pay inheritance tax now or in the future is she breaches the lifetime threshold. But the money becoming jointly yours is not an issue.

    If not, then things can get complex. You are probably best talking to an accountant (and possibly a solicitor) as there will be a lot of variables at play.


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    #3
    brisan
    Registered Users Posts: 2,242 ✭✭✭brisan


    Brego888 wrote: »
    My partner recently received a lump sum of €50,000 inheritance which she used to pay off some of our mortgage.
    We are in the process of doing a mortgage switch and filling out a gift certificate to reflect where the money came from.

    My question is is there any tax compliance issues here? Someone suggested to me that I might have to pay gift tax as essentially this money has gone to a joint account mortgage and as I am not a family member the threshold for gift tax is different.
    I've looked up the revenue site but it's unclear how it would affect my situation.

    https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds.aspx


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    #4
    Brego888
    Registered Users Posts: 1,314 ✭✭✭Brego888


    dotsman wrote: »
    Hard to say without more details.

    Are you and your partner married or in a civil partnership?

    If so, everything should be ok. Your partner may have to pay inheritance tax now or in the future is she breaches the lifetime threshold. But the money becoming jointly yours is not an issue.

    If not, then things can get complex. You are probably best talking to an accountant (and possibly a solicitor) as there will be a lot of variables at play.

    No not married.


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    #5
    Brego888
    Registered Users Posts: 1,314 ✭✭✭Brego888


    brisan wrote: »
    https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds.aspx

    Cheers. Can't make anything out of that for my specific circumstance though.


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    #6
    Yyhhuuu
    Registered Users Posts: 798 ✭✭✭Yyhhuuu


    Brego888 wrote: »
    My partner recently received a lump sum of €50,000 inheritance which she used to pay off some of our mortgage.
    We are in the process of doing a mortgage switch and filling out a gift certificate to reflect where the money came from.

    My question is is there any tax compliance issues here? Someone suggested to me that I might have to pay gift tax as essentially this money has gone to a joint account mortgage and as I am not a family member the threshold for gift tax is different.
    I've looked up the revenue site but it's unclear how it would affect my situation.

    Hi, as regards your partner's gift tax liability ( if any) it will depend on her relationship to disponer to identify tax- free group threshold and any gifts/inheritance received from that group threshold since 5/12/1991.

    If you are not in a civil partnership or marriage with your partner you would be considered group C and entitled to 16 250 tax free ( provided you received nothing from any disponer within group c since 5 Dec 1991)with balance taxed at 33%. Seek the advice of a tax consultant


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    #7
    Geuze
    Registered Users Posts: 13,086 ✭✭✭✭Geuze


    A person inherits 50k, say person X.

    I presume CAT has been paid, if applicable.

    The person X then uses the 50k to repay part of their mortgage.

    The mortgage is a joint mortgage with person Y.


    I suppose the question could arise: is this a 25k gift from X to Y?

    Or is it a 50k cut in person X's mortgage, while person Y's share of the mortgage remains unchanged?


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    #8
    Yyhhuuu
    Registered Users Posts: 798 ✭✭✭Yyhhuuu


    Geuze wrote: »
    A person inherits 50k, say person X.

    I presume CAT has been paid, if applicable.

    The person X then uses the 50k to repay part of their mortgage.

    The mortgage is a joint mortgage with person Y.


    I suppose the question could arise: is this a 25k gift from X to Y?

    Or is it a 50k cut in person X's mortgage, while person Y's share of the mortgage remains unchanged?


    Usually as per the terms of the Mortgage Deed The mortagors ( borrowers) would be jointly and severally- ( I.e. one party alone on a joint mortgage) liable to the mortgagee ( usually a Bank ) for the debt.


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    #9
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    If your partner received the money and paid any gift tax if any due then they can do anything they like with it including paying of part of your joint mortgage. If you were both jointly gifted well then your half is taxable based on no relationship to the disposer I.e 33% on anything above €16250 plus €3000 annual gift exemption.

    If you’re reducing mortgage and then switching why do you need to list it as gift for new mortgage provider, if it’s equity or deposit towards your new mortgage I guess you do.


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    #10
    Brego888
    Registered Users Posts: 1,314 ✭✭✭Brego888


    Baby01032012 wrote: »
    If your partner received the money and paid any gift tax if any due then they can do anything they like with it including paying of part of your joint mortgage. If you were both jointly gifted well then your half is taxable based on no relationship to the disposer I.e 33% on anything above €16250 plus €3000 annual gift exemption.

    If you’re reducing mortgage and then switching why do you need to list it as gift for new mortgage provider, if it’s equity or deposit towards your new mortgage I guess you do.

    Thanks that makes things clearer. We are reducing then switching but the new bank obviously questioned the recent transaction when it came to gathering statements.

    It seems ridiculously that I would have to pay tax on my partners gift from her parents. She received the 50k and I also contributed the same amount from my own savings during the recent deduction.
    Am I now obliged to contact revenue and pay a 4 figure sum to them?


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    #11
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    You said she received 50k from her parents. Then there is no liability. I guess it must have been paid into joint account. Maybe draft up letter for her parents to sign confirming it as a gift to her solely. As it’s less than 80% of her class a threshold of 325k she has nothing to declare to revenue. And once it’s clear gift was to her you have nothing to declare.


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    #12
    ec18
    Registered Users Posts: 2,702 ✭✭✭ec18


    Geuze wrote: »
    A person inherits 50k, say person X.

    I presume CAT has been paid, if applicable.

    The person X then uses the 50k to repay part of their mortgage.

    The mortgage is a joint mortgage with person Y.


    I suppose the question could arise: is this a 25k gift from X to Y?

    Or is it a 50k cut in person X's mortgage, while person Y's share of the mortgage remains unchanged?

    The answer in that scenario is no, same question came up when we bought our house and the answer from an accountant was no. The last scenario is the interpretation.


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    #13
    Brego888
    Registered Users Posts: 1,314 ✭✭✭Brego888


    ec18 wrote: »
    The answer in that scenario is no, same question came up when we bought our house and the answer from an accountant was no. The last scenario is the interpretation.

    Can you expand a bit on this, were you in the same position and how did you proceed?


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    #14
    ec18
    Registered Users Posts: 2,702 ✭✭✭ec18


    Brego888 wrote: »
    Can you expand a bit on this, were you in the same position and how did you proceed?

    so when we bought our house we weren't married and my partner was providing the greater share of the deposit. Our solicitor raised a question as to whether the deposit my partner was providing towards the house would be a tax liability for me as I was 'receiving' the share of the house. Went and got an accountants opinion on it and the answer was no that since it was a joint purchase and joint mortgage draw down it wasn't counted as a gift or taxable

    essentially as said the mortgage on the house is reduced by 50K but your aren't gaining anything from that as your 'share' is still the same


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    #15
    Brego888
    Registered Users Posts: 1,314 ✭✭✭Brego888


    Good to hear


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    #16
    Yyhhuuu
    Registered Users Posts: 798 ✭✭✭Yyhhuuu


    ec18 wrote: »
    The answer in that scenario is no, same question came up when we bought our house and the answer from an accountant was no. The last scenario is the interpretation.

    Just wondering what was the rationale for this Accountant's opinion. This is a legal as well as a tax matter.

    As I mentioned generally co- mortgagors are jointly and severally ( I.e. individually) liable for the Mortgage debt. In this case one Mortgagor is contributing to reducing the overall mortgage debt to the benefit of both co-mortgagors. The question is would Revenue construe this as a taxable gift to the co- Mortgagor? I suggest you review Bohan on Capital Acquisitions Tax


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    #17
    Yyhhuuu
    Registered Users Posts: 798 ✭✭✭Yyhhuuu


    ec18 wrote: »
    so when we bought our house we weren't married and my partner was providing the greater share of the deposit. Our solicitor raised a question as to whether the deposit my partner was providing towards the house would be a tax liability for me as I was 'receiving' the share of the house. Went and got an accountants opinion on it and the answer was no that since it was a joint purchase and joint mortgage draw down it wasn't counted as a gift or taxable

    essentially as said the mortgage on the house is reduced by 50K but your aren't gaining anything from that as your 'share' is still the same

    Did you hold the property as Joint Tenants or Tenants in Common or even dare I suggest Coparcenary?


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    #18
    brisan
    Registered Users Posts: 2,242 ✭✭✭brisan


    Yyhhuuu wrote: »
    Did you hold the property as Joint Tenants or Tenants in Common or even dare I suggest Coparcenary?

    Is Coparcenary ownership recognised in Ireland
    I thought it only applied to female heirs in the Hindu religion


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    #19
    Yyhhuuu
    Registered Users Posts: 798 ✭✭✭Yyhhuuu


    brisan wrote: »
    Is Coparcenary ownership recognised in Ireland
    I thought it only applied to female heirs in the Hindu religion

    The answer is yes as our Law Lecturer in Real Property identified it as another form of co-ownership.

    I assume you googled it.


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    #20
    brisan
    Registered Users Posts: 2,242 ✭✭✭brisan


    Yyhhuuu wrote: »
    The answer is yes as our Law Lecturer in Real Property identified it as another form of co-ownership.

    I assume you googled it.

    Funnily enough no I did not have to
    It came up months ago on another property forum I am on
    At the time it was said it was outdated and of no relevance to the Irish or British property market


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    #21
    ec18
    Registered Users Posts: 2,702 ✭✭✭ec18


    Yyhhuuu wrote: »
    Just wondering what was the rationale for this Accountant's opinion. This is a legal as well as a tax matter.

    As I mentioned generally co- mortgagors are jointly and severally ( I.e. individually) liable for the Mortgage debt. In this case one Mortgagor is contributing to reducing the overall mortgage debt to the benefit of both co-mortgagors. The question is would Revenue construe this as a taxable gift to the co- Mortgagor? I suggest you review Bohan on Capital Acquisitions Tax

    Our solicitor at the time raised it and told us it wasn't a legal matter it was a tax matter and should get an opinion of an accountant. According to the accountant Revenue don't consider this a taxable gift.

    I imagine it's related to it being a PPR and not an investment.
    Yyhhuuu wrote: »
    Did you hold the property as Joint Tenants or Tenants in Common or even dare I suggest Coparcenary?

    Tenants in common at the time, but we're married now so that is probably moot


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