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Inheriting the family home - Do I need to pay tax?

House in Ireland

Gift and Inheritance Tax (Capital Acquisitions Tax – CAT)

CAT is a tax on gifts and inheritances. Over your lifetime you are allowed to receive gifts or inheritances from your parents up to a set value, currently €335,000. Once this threshold is passed, you will need to pay CAT. CAT is charged at the current rate of 33%. 

Do I need to pay inheritance tax if I am left the family home? 

In the event that the value of the house is less than the individual's inheritance threshold, then there should be no CAT on the inheritance of the home. For example, if a home is valued at €320,000 and a parent leaves it to an only child, there is no tax liability on the inheritance. This is based on the only child receiving no other gifts or assets that would affect their inheritance threshold.

It is important to remember that CAT is only paid on amounts above the €335,000 threshold.

If the value of the house is above the threshold or brings the individual's inheritance above the threshold, then CAT should be paid. If we look at an example where the family home is valued at €420,000, there would be no tax on the first €335,000. However, there would be CAT due on the remaining €85,000 at a rate of 33% resulting in tax due of €28,050. 

Dwelling House Exemption

There is an exemption from CAT referred to as the dwelling house exemption that applies if you have lived in the property for the three years immediately prior to the inheritance, and continue to live in the property for six years after the inheritance. You must also have no beneficial interest in any other residential property.

You will be exempt from Capital Acquisitions Tax (CAT) on the inheritance of a dwelling house if, at the date of the inheritance:

  • the house was the only or main home of the person who died (this condition does not apply if you are a dependent relative)
  • you lived in the house as your only or main home for the three years immediately before the date of the inheritance
  • you do not own, or have an interest in, any other house
  • you do not acquire an interest in any other house from the same disponer between the date of the inheritance and the valuation date
  • the house continues to be your only or main home for six years after the date of the inheritance. This does not apply if you:
    - are aged 65 years or over at the date of the inheritance
    - are required by reason of employment to live elsewhere
    or are required to live elsewhere because of mental or physical infirmity, and this is certified by a doctor.

It is important to plan your family's inheritance carefully. It is often a difficult and stressful subject to deal with, however, there are ways of approaching it with sensitivity. 

More and more people are seeing the benefits of Inheritance Planning. 

If you are interested in learning more about inheritance tax in Ireland you can contact us using the form below:

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Corporate Solutions - Nathan Trust