Reducing Inheritance Tax

Inheritance Tax 

While this may not generate enormous revenue for the Government, inheritance tax forever remains a controversial political issue. And, it tends to grow even more prickly as the property rates are increasing at an exponential rate. There has always been an ongoing debate on this matter where some people have been in favour of increasing taxation on the inherited property to reduce income disparity, several people opposed it by giving rational reasons. Recently, the OECD (Organisation for Economic Co-operation and Development) has put forward a motion to levy higher inheritance taxes to pay for pandemic support and urged the Government to lift the tax-free thresholds.   

Understanding OECD standards on Inheritance taxes 

According to the OECD (Organisation for Economic Co-operation and Development) standards, Ireland holds a moderately improving inheritance tax regime. Nevertheless, the inheritance threshold for kids inheriting property from their parents is pretty higher than indirect descendants. As per this threshold, Irish families can leave up to €3,35,000 per child to exempt them from paying inheritance taxes.  This implies that affluent families are more likely to inherit than less well to do families. However, the Government has argued that a home is a principal item in real estate, and this lower threshold will make children inherit it from their parents and trade it to fulfil their tax liability.    

Ways to lessen or avoid inheritance taxes? 

The constant house cost inflation has led to many families in Dublin encountering big capital acquisition tax bills as more and more people are inheriting homes. However, this has made many people fall under the net of inheritance taxes. According to a recent report, more than 16,000 people paid around €522 million as inheritance taxes, and this figure is double the amount that 11,000 people spent in 2010. Hence to help people in this regard, listed below are some ways to reduce or avoid inheritance taxes.   

• Take a small gift exemption 

While it is known that people can inherit the property worth €3,35,000 from their parents without paying any taxes, the less-known part is people can gift up €3000 per year to anyone and receive exemptions from paying capital acquisition taxes. According to various tax experts, this small gift exemption is the best way to evade inheritance taxes.    

• Use a dwelling house exemption 

Using a dwelling house exemption is another transcendent way to avoid or reduce taxes. However, it also imposes some restrictions. Under this exemption, if a child resides in his parent’s home for more than 3 years (and do not hold any property), parents can then gift that home to the child tax-free.   

• Get married

While this is an extreme move, getting married is a great way to pass on your property without attracting any tax liability. Also, if you die before your spouse, they will get exempted from paying capital acquisition tax on the acquired property.   

• Get a section 72 insurance policy 

By purchasing a section 72 policy, a person can receive the capital acquisition tax coverage applying to the person who gifts the property. This is one of the best ways that help a person remain guarded against hefty inheritance taxes on large estates. However, you must note that these section 72 policies are costlier than whole life insurance, and this policy must get paid without any breaks.  Apart from all these mentioned ways, seeking help from experts can also help you save inheritance taxes.  We have a team of experienced tax advisors  who would be happy to discuss your position with you.