I am single and live with my parents. Can my parents sign the house over to me now as opposed to waiting to bequeath it to me in their will, which is currently the plan? If they sign it over now would it be categorised as a gift, and would tax be charged accordingly? Any advice on this would be greatly appreciated.
We must look at this from a capital gains tax (CGT), capital acquisitions tax (CAT) and stamp duty perspective.
A gift is treated as a disposal of the house at its market value, and CGT may arise for the person gifting the house if the house has increased in value from the time it was purchased. However, Principal Private Residence (PPR) relief can relieve the CGT where the house has been used as your parents’ principle residence throughout their ownership period. Stamp duty arises when property is transferred by way of a gift, and this is payable by the person receiving the property.
A gift is liable to CAT in the same way as an inheritance, and the tax falls on the individual receiving the gift. You have a lifetime threshold of €335,000, and any value above that is liable to CAT at 33 per cent. In the case of a gift from your parents, you can also avail of the small gift exemption of €6,000 combined in a year to increase the tax-free amount to €341,000. We note that subject to changes in Budget 2025, the tax-free threshold for gifts from parents to child will increase from €335,000 to €400,000 from January 1st, 2025. Where both CAT and CGT arise on the same event, the CGT can be offset against the CAT.
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There is no CGT or stamp duty charged on assets that your parents may pass on to you as an inheritance. CAT will still arise in this case, however, unless you qualify for Dwelling House Exemption. There are a number of qualifying conditions that must be met for the exemption, including that you cannot own any other house or inherit any other house under the person’s will, and that you have lived in the house for the three years prior to the inheritance.
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The CAT charges may be lessened by your parents transferring the house to your name during their lifetime if it is likely to further increase in value. It is also advisable to provide for a “nonexclusive right of residence” in the house for your parents, in which case a slice of the property is effectively not treated as passing to you until after their death. This could then reduce the amount of CAT you will be required to pay on the gift of the property, and it is charged at a later date on the inherited slice.
Suzanne O’Neill is a tax partner at RSM Ireland
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