Inheritance tax

RandomName2 · 09-10-2014 01:07PM #1

The cost of inheritance tax is too damn high!
Since the recession hit, this has become a bit of a cash cow for the government. Now that things are getting better, perhaps there would be the possibility of scaling it back a bit in the next budget.

I have a friend whose uncle passed away last year, whom he was very close to. This uncle had no children and decided to leave his property to his nephew. Although the uncle had worked to clear off the mortgage, his nephew was landed with a tax bill of almost one hundred thousand euro for the inheritance! (I suppose the property was worth around €420K). Presumably the uncle had hoped to keep the property in the family, but unfortunately it had to be sold off to pay this debt.

Why should someone work for years (paying tax while doing so) and have that much ultimately taken by the govenment? While taxing capital acquisition and gains to a certain extent makes sense, it seems too excessive at the moment.

qo2cj1dsne8y4k · 09-10-2014 01:09PM

Yeah it is absolutely ridiculous, you're allowed inherit up to 250k without being taxed, anything over it is taxed outrageously high

SVJKarate · 09-10-2014 01:10PM

The total tax take by government must cover the cost of running the country.

People are averse to paying tax while they are alive, but are less likely to change their voting habits after they die. Given the choice, taxing the dead is far more palatable than taxing the living.

BeerWolf · 09-10-2014 01:10PM

Tax on inheritance is criminal tbh, considering the original owner of it was already paying all their taxes related to it prior to the inheritance...

Practically free money out of nothing for the Government...

Steven81 · 09-10-2014 01:10PM

High because he was a nephew if it was a son/ daughter it isnt too bad, not sure of exact amounts though

SEPT 23 1989 · 09-10-2014 01:11PM

Get a better accountant

09-10-2014 01:14PM

RandomName2 wrote: »

The cost of inheritance tax is too damn high!
Since the recession hit, this has become a bit of a cash cow for the government. Now that things are getting better, perhaps there would be the possibility of scaling it back a bit in the next budget.

I have a friend whose uncle passed away last year, whom he was very close to. This uncle had no children and decided to leave his property to his nephew. Although the uncle had worked to clear off the mortgage, his nephew was landed with a tax bill of almost one hundred thousand euro for the inheritance! (I suppose the property was worth around €420K). Presumably the uncle had hoped to keep the property in the family, but unfortunately it had to be sold off to pay this debt.

Why should someone work for years (paying tax while doing so) and have that much ultimately taken by the govenment? While taxing capital acquisition and gains to a certain extent makes sense, it seems too excessive at the moment.

The nephew didn't work for years for this - his uncle did. What spending would you cut or other tax would you increase to balance out your proposed tax cut?

AnonoBoy · 09-10-2014 01:14PM

My accountant advised a 'Weekend at Bernie's' type scheme to avoid paying inheritance tax.

It worked and you eventually get used to the smell.

KomradeBishop · 09-10-2014 01:14PM

It's effectively a gift from the parent to inheritors, and the gift tax is also at 33% - except the threshold there is €3,000.

So, if your parent gifted you the house while living, it'd cost a crapload more in tax - inheritance has a threshold all the way up to €225,000.

BoJack Horseman · 09-10-2014 01:14PM

Don't vote for SF then.
Their budget plan called for a rise in this tax.

Ri_Nollaig · 09-10-2014 01:15PM

SEPT 23 1989 wrote: »

Get a better accountant

the tax due sounds about right, unless its a farm or something.
http://www.revenue.ie/en/tax/cat/thresholds.html.
As he was his uncle he is only due €30,150 of it tax free so its 33% on the remainder.

Locomotion · 09-10-2014 01:20PM

How to get the family home completely exempt of tax

Example - father has already passed, mother owns the house. One son.

1) Son is living in the house, owned by the mother for at least 3 years prior to her death

2) Son does not own any other residential property

3) Son keeps home for at least 6 years after the mother dies.

Taxes owed to government = ZERO

If those conditions aren't met and you have to pay tax on it, then let's say the house is worth €500k.

You'll pay €500k - €225k (exempt part) = €275k X33% = €90,750.

But that amount massively increases based on how much the government think the house is worth. They may decide with their 'expert opinions' that the house is worth €1 million and in that case

You'll pay €1m - €225k (exempt part) = €775k X33% = €255,750

Absolutely outrageous that a house that your parents spent their life paying off in full could now wind up costing you this much in tax!

Clearlier · 09-10-2014 01:22PM

RandomName2 wrote: »

Why should someone work for years (paying tax while doing so) and have that much ultimately taken by the govenment? While taxing capital acquisition and gains to a certain extent makes sense, it seems too excessive at the moment.

The government didn't take the money from the deceased, they took it from the nephew.

This double tax argument is ridiculous. As far as we know the nephew did nothing to earn this money. He got it because he happened to be related to the deceased. I have no understanding why anybody would think that they should be allowed to inherit without paying tax on it. It promotes non-meritocratic inequality (which I can't see any argument in favour of).

Not a fan of Sinn Fein but if they're saying that inheritance tax is too low then they've got at least one sound policy.

antoinolachtnai · 09-10-2014 01:22PM

The issue is that the government needs to get a proportion of the wealth generated in the economy in order to reinvest in the economy. That is why you have to have some sort of tax on inherited wealth. This is all the more true when there is no capital gains tax on sale of the personal private residence.

Think about this. A lot of the increase in the value of property comes about because of capital investments the State makes in roads, infrastructure and so on. The government needs to get some share of this increase in the value so that it can reinvest in similar projects in the future.

Why should there be less tax on increases in the value of property or windfall inheritances than there is on money you get from going out and working?

The person inheriting can always raise a new mortgage using the inherited property as collateral and using the rental income to pay off the mortgage. If they aren't in a position to do that, then what use were they really going to be able to make of the property?

seamus · 09-10-2014 01:27PM

It's not really any different from any other kind of tax. Wealth gets transferred, and the government takes a cut of the transfer.

You could use the same argument against any tax tbh - "Why should I spend my whole month working my ass off, only to have the government take away 42% of my pay"

Inheritance tax to a certain extent makes sense because it spreads the wealth around. Without it, families can effectively hoard assets and wealth indefinitely, a black hole into which inflationary gains disappear, never making their way back into the state.

The only alternative is an ongoing wealth tax, which requires a declaration each year of a person's entire estate and levies a payable tax on that. But that's very complicated and time-consuming to chase. Plus it doesn't take account of the individual's liquid wealth in a given year. Far easier and fairer to just lop it off the top when you die.

Are the thresholds and taxes too low/high? I don't know. Whatever way you look at it, it's free money for the recipient. The recipient hasn't specifically done anything to earn that inheritance. There's no injustice being done on anyone - the person who put in all the work is dead, so he's not losing anything.

tricky D · 09-10-2014 01:43PM

I've no problem with the tax as a concept but since 2008 the Gov has pretty much halved the thresholds and raised the rate from 20% to 33%. It's been some money grab in that period that they have managed to slip in under the radar in budgets and with what justification apart from 'cuz we can'.

Group Threshold
Year

Group Threshold A son/daughter, minor child of deceased child, (parents –unlimited inheritances only)

Group Threshold B E.g. parent, brother, sister, niece, nephew, grandchild

Group Threshold C relationships that do not fall in Group A or B
2008 €521,208 €52,121 €26,060
1/1/09 - 7/4/09 €542,544 €54,254 €27,127
8/4/09 - 31/12/09 €434,000 €43,400 €21,700
1/1/10 - 7/12/10 €414,799 €41,481 €20,740
8/12/10 - 6/12/11 €332,084 €33,208 €16,604
7/12/11 - 5/12/12 €250,000 €33,500 €16,750
On or after 6/12/12 €225,000 €30,150 €15,075

The Threshold Amount is calculated by reference to the aggregate of all taxable inheritances and taxable gifts taken within the same group threshold after 5th December 1991.

Rate of Tax

Where the Threshold Amount has been exceeded, the rate of CAT applied depends on the date the benefit was taken. The following rates apply in respect of benefits taken since 2008.
Date of Benefit Threshold Amount Balance at
2008 0% 20%
1/1/09 - 7/4/09 0% 22%
8/4/09 - 6/12/11 0% 25%
7/12/11 - 5/12/12 0% 30%
From 6/12/12 0% 33%

anncoates · 09-10-2014 01:48PM

Receive completely free asset worth 420k.

Are liable for 100k, leaving 320k.

Complain.

antoinolachtnai · 09-10-2014 01:54PM

tricky D wrote: »

I've no problem with the tax as a concept but since 2008 the Gov has pretty much halved the thresholds and raised the rate from 20% to 33%. It's been some money grab in that period that they have managed to slip in under the radar in budgets and with what justification apart from 'cuz we can'.

Because property had dropped in value, the government had to reduce the thresholds and increase the amounts in order to maintain the same level of income from the tax.

Unfortunately the government needs all this money to invest in services and infrastructure.

If it stimulated some house sales that was an advantage too, because there was so little property being traded over that period.

2smiggy · 09-10-2014 02:03PM

anncoates wrote: »

Receive completely free asset worth 420k.

Are liable for 100k, leaving 320k.

Complain.

tax has already been paid on the asset. also, where do you come up with the €100K ? Sell the asset or take out another mortgage. I think it's highly unfair to tax inheritance left to family members.

09-10-2014 02:15PM

KomradeBishop wrote: »

It's effectively a gift from the parent to inheritors, and the gift tax is also at 33% - except the threshold there is €3,000.

So, if your parent gifted you the house while living, it'd cost a crapload more in tax - inheritance has a threshold all the way up to €225,000.

Incorrect, the gift has the same threshold as the inheritance. 225k is a crazy low threshold though for parents to children.

2smiggy wrote: »

tax has already been paid on the asset. also, where do you come up with the €100K ? Sell the asset or take out another mortgage. I think it's highly unfair to tax inheritance left to family members.

Its simple jealousy, people who are in favour of inheritance tax are not going to be affected (or badly affected by it).

It is an utter disgrace of a tax not to mind how crazy high it is at 33%. If it was single digit percentages then it might be slightly easier to stomach. A person giving money or property to another family member should be totally tax free. Its the familys money and tax has already been paid on it two or even three times.

At the very least the tax free threshold from parents to children should be significantly increased and the threshold extended to uncles, aunts, grandparents etc.

I have too laugh at people saying it doesnt punish the giver also, do you really think the person giving the money or property wants to see 33% of it going to the tax man, you can be damn sure they don't.

tricky D · 09-10-2014 02:15PM

antoinolachtnai wrote: »

Because property had dropped in value, the government had to reduce the thresholds and increase the amounts in order to maintain the same level of income from the tax.

While true, that only really justifies one of the movements (threshold or rate) and the likelihood that those figures will readjust as the market recovers is obviously low, very low.

Paulownia · 09-10-2014 02:22PM

once again a tax to punish the middle classes, if you live off the state all your life you pay no tax. If your parents work hard pay taxes and die with money having supported themselves, paid all their own medical expenses why should their kids be screwed. Sinn Fein does not draw it's support from these people, I wonder why?

B0jangles · 09-10-2014 02:23PM

Also the taxman wants his cut within a couple of months of you inheriting, so if you are lucky enough to inherit a house and you don't have upwards of hundred grand lying around in the bank, you'd better hope you can sell it really really quickly.

Frank11 · 09-10-2014 02:23PM

Any recommendations?

SEPT 23 1989 wrote: »

Get a better accountant

Paulownia · 09-10-2014 02:28PM

accountants can't do anything, if you are mega rich there are possibilities with offshore stuff and special tax incentive investments but not for the middle class person with a house in Dublin and a few bob in the bank

Slot Machine · 09-10-2014 02:33PM

Paulownia wrote: »

once again a tax to punish the middle classes

Does the middle class get some kind of tax break for all the complaining done or something? All I ever see is middle class this, that and the other.

bear1 · 09-10-2014 02:34PM

What if you can't afford the tax? You are then forced to sell it?

Clearlier · 09-10-2014 02:36PM

Kaiser Tasteless Nostril wrote: »

Incorrect, the gift has the same threshold as the inheritance. 225k is a crazy low threshold though for parents to children.

On what basis do you justify that assertion? I can't understand an argument for allowing anyone to receive 200k tax free without doing anything for it.

Kaiser Tasteless Nostril wrote: »

Its simple jealousy, people who are in favour of inheritance tax are not going to be affected (or badly affected by it).

I'm in favour of inheritance tax and I'll be surprised if it doesn't apply assuming that my parents die before me and leave their estate to their children.

It's about equality. I've had plenty of advantages in life already courtesy of my parents - I don't particularly see why I or anyone else should get another one. (I don't know what the situation is with dependents but I can see a good argument for having different rules where there are dependents).

Kaiser Tasteless Nostril wrote: »

It is an utter disgrace of a tax not to mind how crazy high it is at 33%. If it was single digit percentages then it might be slightly easier to stomach. A person giving money or property to another family member should be totally tax free. Its the familys money and tax has already been paid on it two or even three times.

Tax hasn't been paid. Generally tax is payable when transfers occur. I pay tax on my income. Does that mean that the shop I give it to in exchange for goods shouldn't have to pay tax?

The difference of opinion we have here is around the primacy of the family over society. A line has to be drawn somewhere and we draw it in different places. I prefer to have an inheritance tax because I believe that in general it's better for society. It sounds like you prefer not to have one because it's better for the family? Those are value judgements that it's perfectly reasonable to hold. I doubt that either of us could persuade the other.
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KomradeBishop · 09-10-2014 02:37PM

Paulownia wrote: »

once again a tax to punish the middle classes, if you live off the state all your life you pay no tax. If your parents work hard pay taxes and die with money having supported themselves, paid all their own medical expenses why should their kids be screwed. Sinn Fein does not draw it's support from these people, I wonder why?

Uhm, the kids get 100% of the first €225,000 of their parents assets, and 66% of the rest, all completely free - how is that punishing anyone?

You're going on about people 'living off the state' all their life, i.e. not contributing back to society, in order to earn their rewards there - and in the same breath, you're complaining about people only getting 66% of all their parents assets past €225,000, completely free, while having done nothing to earn it?

Fúck that - that's a pretty good deal, considering they did absolutely nothing to earn any of it.

anncoates · 09-10-2014 02:39PM

2smiggy wrote: »

tax has already been paid on the asset..

By the owner. Not by the windfallee.

anncoates · 09-10-2014 02:42PM

Paulownia wrote: »

once again a tax to punish the middle classes, if you live off the state all your life you pay no tax. If your parents work hard pay taxes and die with money having supported themselves, paid all their own medical expenses why should their kids be screwed. Sinn Fein does not draw it's support from these people, I wonder why?

Ironic that you berate people for taking without paying taxes then advocate not paying tax on an asset that you yourself did nothing to earn.

Inheritance tax

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