‘I want to pass on a couple of Dublin city apartments I own to my sons tax-free. Is this possible?’

Question:  I own a couple of apartments in Dublin city centre which I am renting out to tenants. I was hoping to use the dwelling house exemption so that those apartments could be passed onto my sons tax-free. The tenants are due to move out of the apartments soon and my sons were planning to move into an apartment each so that they would qualify for the exemption. I’ve heard the rules around the exemption have changed though. Will it still be possible for my sons to claim it?

Martin, Drumcondra, Dublin 3

Answer: Unfortunately, the exemption that you were hoping to avail of was severely restricted last year. It now applies only to inheritances, and even then, only where the dwelling was the only or main residence of the deceased at the date of death. So it can’t apply here.

Under the tax-free thresholds for Capital Acquisitions Tax (CAT – also known as gift or inheritance tax), if your sons have not had any gifts from you or your wife to date, they can get gifts of up to €310,000 each from you without gift tax applying. Therefore, if each apartment is worth less than €310,000, you can still give the properties tax-free to your sons. If the apartments are worth more, the tax applies only on the excess. The current rate of gift tax is 33pc.  The Finance Minister indicated that this €310,000 threshold figure will likely rise in the years ahead, so it may be worth waiting to see if this happens.

If you gift the apartments (as opposed to leaving them in your will), Capital Gains Tax (CGT) can also apply if the apartments have increased in value since they were bought. The current rate is 33pc. In this case it’s worth getting expert advice.

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