CAN YOU EXPLAIN THE ANNUAL GIFT EXEMPTION
Q – I am wondering can each parent gift €3,000 a year tax free to their children ? I was told only one parent is allowed. Are such gifts counted in the current € 335,000 inheritance threshold, free of Capital Acquisition Tax (CAT) to which each child is entitled to? And are those thresholds likely to increase over the coming years ? Dave – Limerick
A – Thanks Dave. Those thresholds were rumoured to rise every Budget but never materialised. Back in April 2009, that threshold was € 542,544 ! They may increase again – it is only fair but of course it will also depend on politics. You can gift not just your child but any person including me the sum of € 3,000 each year tax free under the Gift Tax Exemption legislation. This is completely separate to the inheritance thresholds and is NOT included in any aggregate. The three Capital Acquisition Tax thresholds are
A – parent to child (€ 335,000)
B – grandchildren, nephews/nieces, brothers/sisters (€ 32,500)
C – all others (€ 16,250) including me …
There are other groups within these categories which you can check the link http://www.revenue.ie/en/tax/cat/thresholds.html So to simplify it Dave, you can give anyone € 3,000 every year plus € 16,250 as a gift and an inheritance from you. Your wife can also give € 3,000 every year but remember with inheritance aggregates count – a second aunt gifting you € 32,500 will result in a CAT liability for you of € 10,725… If the parents are divorced, the child can only benefit from the inheritance ONCE as both would not be allowable and NOT double the threshold – currently as you say € 335,000 provided of course they have the assets to bequeath.