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Returning a parental gift - tax

  • 09-08-2018 8:54pm
    #1
    Shandon
    Registered Users Posts: 80 ✭✭


    I understand receiving a substantial gift from parents towards a mortgage deposit is not subject to tax. What if you don't then use this gift and want to pay it back in a lump sum to them? Would this then be liable for tax?


Comments

  • #2
    Gumbo
    Moderators, Society & Culture Moderators Posts: 38,357 Mod ✭✭✭✭Gumbo


    Shandon wrote: »
    I understand receiving a substantial gift from parents towards a mortgage deposit is not subject to tax. What if you don't then use this gift and want to pay it back in a lump sum to them? Would this then be liable for tax?

    If you don’t accept the gift here’s no liability.


  • #3
    Shandon
    Registered Users Posts: 80 ✭✭Shandon


    kceire wrote: »
    If you don’t accept the gift here’s no liability.
    So if the gift was in your account for 6 to 12 months and is then just paid back there is no liability?


  • #4
    The Student
    Registered Users Posts: 1,238 ✭✭✭The Student


    Technically you would be liable for dirt tax and income tax on the interest less the dirt paid. But given the low rates of interest you would not have a tax liability.


  • #5
    Shandon
    Registered Users Posts: 80 ✭✭Shandon


    The Student wrote: »
    Technically you would be liable for dirt tax and income tax on the interest less the dirt paid. But given the low rates of interest you would not have a tax liability.
    Thanks. Explain that a bit more. Say for eg it was 10k


  • #6
    Lumen
    Registered Users Posts: 31,008 ✭✭✭✭Lumen


    Shandon wrote: »
    I understand receiving a substantial gift from parents towards a mortgage deposit is not subject to tax.
    Where did you get that information? AFAIK it's tested the same as a gift for any other purpose, counts towards your lifetime threshold.


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  • #7
    Shandon
    Registered Users Posts: 80 ✭✭Shandon


    Lumen wrote: »
    Where did you get that information?
    Nowhere official just heard it wasn't from various sources. Is it?
    I had presumed that part of it was OK but was wondering if you never bought but in the meantime saved the money and paid it back to them would that be liable.
    Maybe both ways is!
    Anyone know for sure??


  • #8
    Shandon
    Registered Users Posts: 80 ✭✭Shandon


    Lumen wrote: »
    Where did you get that information? AFAIK it's tested the same as a gift for any other purpose, counts towards your lifetime threshold.

    Sorry only saw this part now. I was aware it was part of the lifetime threshold of 310k alright. But that will never be reached anyway so its immaterial!


  • #9
    GingerLily
    Registered Users Posts: 4,767 ✭✭✭GingerLily


    If it was a loan rather then a gift, and you returned it - then you don't think you owe tax, provided that the amount of interest you would pay if a bank loaned you the money, is less then the tax free annual gift you can receive (3k per parent)


  • #10
    TheChizler
    Registered Users Posts: 9,400 ✭✭✭TheChizler


    The Student wrote: »
    Technically you would be liable for dirt tax and income tax on the interest less the dirt paid. But given the low rates of interest you would not have a tax liability.
    Same as any other money in a bank account earning interest: your bank takes care of this.


  • #11
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,278 Mod ✭✭✭✭The_Conductor


    GingerLily wrote: »
    If it was a loan rather then a gift, and you returned it - then you don't think you owe tax, provided that the amount of interest you would pay if a bank loaned you the money, is less then the tax free annual gift you can receive (3k per parent)

    The parents could have a tax liability associated with the return of the gift- as the rules on receiving a gift are a lot more generous from a parent to child- than they are vice versa. Hypothetically- the parents would be liable for income tax on the value of the gift from their child back to them- unless it could be shown that there was a formal loan arrangement in place for the gift (and of course depending on the size of the gift and the thresholds).

    A handy way of returning the cash (depending on the size of the amount) would be in 3k increments on an annual basis over 3-4 years- which would be a tax efficient manner of doing it (for everyone concerned).


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  • #12
    The Student
    Registered Users Posts: 1,238 ✭✭✭The Student


    The_Conductor wrote: »
    The parents could have a tax liability associated with the return of the gift- as the rules on receiving a gift are a lot more generous from a parent to child- than they are vice versa. Hypothetically- the parents would be liable for income tax on the value of the gift from their child back to them- unless it could be shown that there was a formal loan arrangement in place for the gift (and of course depending on the size of the gift and the thresholds).

    A handy way of returning the cash (depending on the size of the amount) would be in 3k increments on an annual basis over 3-4 years- which would be a tax efficient manner of doing it (for everyone concerned).

    The inheritance limits from parent to child and child to parent are the same. Both form part of category A. So the limits to parent to child and child to parent are the same.


  • #13
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    The Student wrote: »
    The inheritance limits from parent to child and child to parent are the same. Both form part of category A. So the limits to parent to child and child to parent are the same.

    Not correct. Child to parent or grandparent is same as to grandchild brother or sister it’s category B 32500 lifetime limit.

    My thoughts would be to keep it. It will form part of the lifetime threshold. Unless it was 80% or more of 310,000 you won’t have made the IT38 return. Or you could get parent to sign letter stating it was a loan and return it. Or return in increments of €3000 pa as the conductor suggested, small gifts up to that amount can be made to anyone annually. It all depends on the amount we’re talking about here.


  • #14
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    To add - you might get better responses in taxation forum as this is tax rather than property related


  • #15
    The Student
    Registered Users Posts: 1,238 ✭✭✭The Student


    Baby01032012 wrote: »
    Not correct. Child to parent or grandparent is same as to grandchild brother or sister it’s category B 32500 lifetime limit.

    My thoughts would be to keep it. It will form part of the lifetime threshold. Unless it was 80% or more of 310,000 you won’t have made the IT38 return. Or you could get parent to sign letter stating it was a loan and return it. Or return in increments of €3000 pa as the conductor suggested, small gifts up to that amount can be made to anyone annually. It all depends on the amount we’re talking about here.

    My apologies you are correct it is category B not A as I referenced.


  • #16
    GingerLily
    Registered Users Posts: 4,767 ✭✭✭GingerLily


    The_Conductor wrote: »
    The parents could have a tax liability associated with the return of the gift- as the rules on receiving a gift are a lot more generous from a parent to child- than they are vice versa. Hypothetically- the parents would be liable for income tax on the value of the gift from their child back to them- unless it could be shown that there was a formal loan arrangement in place for the gift (and of course depending on the size of the gift and the thresholds).

    A handy way of returning the cash (depending on the size of the amount) would be in 3k increments on an annual basis over 3-4 years- which would be a tax efficient manner of doing it (for everyone concerned).

    I am suggesting that they call it a loan, not a gift.

    Here's an explanation in more detail :

    https://www.irishtimes.com/business/personal-finance/dealing-with-an-interest-free-loan-from-the-bank-of-mum-and-dad-1.3232993?mode=amp


  • #17
    Lantus
    Registered Users Posts: 3,027 ✭✭✭Lantus


    Not only are you liable for tax but any else on the mortgage would be jointly liable for tax on that gift as well.


  • #18
    Shandon
    Registered Users Posts: 80 ✭✭Shandon


    I think the issue has got a bit confused.

    The question related to a 10k sum of money given to use as deposit for a house. There will be no more money given before or nor will there be again. So the lifetime threshold will definitely not be breached. Am I right?

    As for gifting it back
    This will be the only money ever given from child to parents so presume this would not break any threshold limits either?


  • #19
    GingerLily
    Registered Users Posts: 4,767 ✭✭✭GingerLily


    Shandon wrote: »
    I think the issue has got a bit confused.

    The question related to a 10k sum of money given to use as deposit for a house. There will be no more money given before or nor will there be again. So the lifetime threshold will definitely not be breached. Am I right?

    As for gifting it back
    This will be the only money ever given from child to parents so presume this would not break any threshold limits either?

    Did you read the article I linked?


  • #20
    Shandon
    Registered Users Posts: 80 ✭✭Shandon


    GingerLily wrote: »
    Did you read the article I linked?

    Sorry I just did now thanks. Given this would be paid back in one year or at most two I think I'm right in saying that the interest would be even smaller and less likely to cause an issue?


  • #21
    GingerLily
    Registered Users Posts: 4,767 ✭✭✭GingerLily


    Shandon wrote: »
    Sorry I just did now thanks. Given this would be paid back in one year or at most two I think I'm right in saying that the interest would be even smaller and less likely to cause an issue?

    If your parents give you an interest free loan, then the interest free element is the gift, so if that's less then 3k per annum neither of you owe revenue.
    If the loan is less than 100k I think your fine, if its above that you might want to talk to an account.

    https://www.revenue.ie/en/gains-gifts-and-inheritance/valuation-date-and-the-value-of-certain-benefits/free-use-of-property-and-interest-free-loans.aspx


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