Your Money

Tax-free gifts can help younger family members

Q&A: Small gift exemption is a very useful way of passing money down generations with no taxation worries

The small gift exemption allows you give €3,000 a year to anyone you want to without any worry about tax. Photograph: iStock
The small gift exemption allows you give €3,000 a year to anyone you want to without any worry about tax. Photograph: iStock
Dominic Coyle's picture
Dominic Coyle
Tue Oct 11 2022 - 05:00

I note that parents can gift €3,000 each per annum during their lifetime to their own children tax-free, without cumulative impact on subsequent inheritance.

Our son has passed away and my now adult grandchildren are at family formation age. What are the tax implications of cash gifts to assist them?

Mr WK,

This small gift exemption is one of the most favourable elements of the Irish tax code for most ordinary people trying to help out their families or friends without anyone having to worry about tax. Yet, it remains mystifyingly modestly used by all accounts.

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You are correct that you can use it to help out your own children tax-free but it is not limited to that. In fact, you can give up to €3,000 to anyone you care to and there will be no tax issue either for the donor or the recipient. That includes your children certainly but also other relations – including your adult grandchildren – friends or even passing strangers should you be so inclined.

And, as you mention parents, in the plural, I should remind you that each parent can make such a payment.

Per person

So, in the case of your adult grandchildren who are just considering starting their own families, there is nothing to stop you giving each of them €3,000 a year if your financial resources allow, and your wife or partner giving them the same – a benefit of €6,000 a year tax-free to the recipient.

And you don’t have to limit it to one child or person. You can give up to €3,000 a year to as many people as you like.

You can give it once-off or you can give it every year, entirely at your discretion. There’s no obligation to max out the payment; you might feel that you would like to give something but can really only afford €1,000 or less. That’s perfectly fine.

The one thing to make sure if is that you do not leave yourself short in doing so. They have better earning capacity than you will in terms of getting out of a financial hole.

The only other thing to bear in mind is that should you need nursing home care and avail of the Fair Deal subsidy as suitable for most people, it will “claw back” any gifts made in the five years prior to any such application for the purposes of calculating your means and what your contribution to your care should be.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

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