Calls Grow to Increase Tax-Free Gift Allowance for Parents Supporting Children in Ireland

Dublin: Pressure is mounting on the government to increase the annual tax-free gift allowance for parents supporting their children, with growing calls to raise the limit from €3,000 to €5,000 per parent in response to rising living costs.

Under current tax rules, an individual can receive gifts of up to €3,000 from another person in a calendar year without incurring Capital Acquisitions Tax (CAT). As each parent is treated as a separate donor, a child can currently receive up to €6,000 annually from both parents tax-free.

However, critics argue that the threshold, which has remained unchanged for two decades, no longer reflects the realities of rising rents, house deposits, education costs and everyday living expenses.

Proposal to Double Annual Family Support

The proposal has been put forward by Fianna Fáil TD Cormac Devlin, who said the existing exemption should be updated to reflect today’s economic conditions.

If adopted, the change would allow parents to gift up to €5,000 each per year, enabling a child to receive €10,000 annually from both parents without triggering tax liabilities.

Supporters say the increase would provide meaningful assistance to young adults saving for a first home, pursuing higher education or coping with the rising cost of living.

Lifetime Tax-Free Threshold Remains

Separate from the annual small gift exemption, children can currently receive up to €400,000 in gifts or inheritances from their parents over their lifetime before Capital Acquisitions Tax generally becomes payable.

Amounts exceeding this lifetime threshold may be subject to 33% Capital Acquisitions Tax, making careful financial planning essential for larger transfers.

Property Transfers Require Careful Planning

Tax experts also caution families about transferring property or proceeds from property sales to children.

While the sale of a parent’s principal private residence is generally exempt from Capital Gains Tax, any money subsequently gifted to children is treated as a gift and may have tax implications depending on the amount involved.

Similarly, transferring ownership of a family home, investment property or rental property directly to children can create tax liabilities in certain circumstances.

Families are therefore advised to seek professional legal and tax advice before making significant financial or property transfers.

With household costs continuing to rise, there is increasing political support within both Fianna Fáil and Fine Gael for reviewing the annual gift exemption.

Supporters argue that outdated tax thresholds should not discourage parents from providing modest financial assistance to their children during a period of high housing costs and inflation.

Attention is now turning to the government’s upcoming financial announcements, where many families hope the proposed increase in the tax-free gift allowance will be given serious consideration.

Irish Samachar English