My parents are looking to fund our home renovation project without creating tax issues. Photograph: iStockMy wife and I are in a fortunate position to have been offered a loan of €100,000 from my parents. We have our own house but are thinking of renovating.
People can expend an awful lot of energy trying to minimise tax issues, especially on intergenerational or family financial assistance and yet ignore the small gift exemption which is, in my view, one of the most useful ways to legitimately arrange such transfers. In your case, where both your parents are alive, they can each “gift” you up to €3,000 a year without any tax implications for anyone. That, as you note, is “free money” of €6,000 a year.
People also assume that there must be some family relationship to make such a tax free gift permissible, but that’s not so. Clearly, it is normally most relevant for families, but any person can gift up to €3,000 to anyone — family, friend or even a stranger — within the terms of the exemption.
Having said that, there is zero obligation on your parents to notify Revenue of any such transfer. You Dad is absolutely correct. It is your parents’ money and they are free to do what they choose with it, without reference to anyone. Finally, in relation to the interest rate, the law currently states that the interest rate applying on an inter-family loan must match what the lender could receive in interest if that money was held in a demand deposit account with their bank. At present, that is bugger all and would be amply covered under the small gift exemption as proposed but, with interest rates rising once again, that may change over the coming years.
Heartless..they should be helping out the poor Ukrainian people fleeing the war