Tax Exemption for Dwelling House - CAT 10

Introduction

Section 86 of the Capital Acquisitions Tax Consolidation Act 2003 provides that inheritances of a dwelling house taken on or after 25 December 2016 will be exempt from capital acquisitions tax provided the following conditions are satisfied:

  1. The donor must have occupied the dwelling house as his/her only or main residence at his/her date of death. This requirement will be relaxed in situations where the deceased person had to leave because of ill health e.g. to live in a nursing home;
  2. The beneficiary must have continuously occupied the dwelling house as his/her only or main residence for a period of three years immediately before the date of the inheritance. Where the dwelling house on which the exemption is claimed, replaced another dwelling house within the three year period, this condition will be satisfied where the beneficiary has continuously occupied both houses as his/her only/main residence for a total period of three out of the four years, immediately prior to the date of the inheritance;
  3. The beneficiary must not be entitled to an interest in any other dwelling house at the date of the inheritance and
  4. The beneficiary must continue to occupy the dwelling house (except where such beneficiary is aged 65 or over) as his/her only or main residence for a period of six years from the date of the inheritance. The exemption will not be withdrawn where the recipient requires long term medical care in a hospital/nursing home/convalescent home or is required by reason of his employment to reside elsewhere.

The exemption also applies to residential properties that are gifted to a dependent relative of the donor. A dependent relative is a direct relative of the donor or of the donor’s spouse or civil partner, who is permanently and totally incapacitated because of physical or mental infirmity from maintaining himself/herself or who is over the age of 65.

In the case of a gift of a dwelling house to a dependent relative, the dwelling house is not required to have been the principal private residence of the donor.

Gifts taken prior to 25 December 2016: The recipient of a gift of a dwelling house does not have to be a dependent relative to qualify for the exemption.

Gifts taken on or after 20 February 2007: Any period during which a donee occupies a house that was during that period the disponer's only or main residence will be disregarded as a period of occupation in that house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the donee for that period. Old age refers to a person aged 65 or over.

Gifts taken on or after 20 February 2007: The house must be owned by the disponer during the 3 year period prior to the gift and, where the gifted house has replaced another property, each house must be owned by the disponer for the relevant part of the 3 year period that it was occupied by the beneficiary

January 2017

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