Same-sex couples to pay even more inheritance tax
18 Jan 2010
Recipients of inheritances and gifts face higher tax bills after Revenue cut the threshold at which they can be received tax-free by as much as €19,300 - the second cut in less than a year.
Revenue's thresholds for capital acquisitions tax (CAT) will be cut by 4.5 per cent for inheritances or gifts received in 2010, in line with the fall in the consumer price index last year.
The cuts are the second in the space of nine months, after Finance Minister Brian Lenihan reduced the thresholds by 20 per cent in last April's emergency budget, in an effort to boost the CAT tax take and help offset the collapse in government revenues.
The changes mean that inheritances bequeathed by a parent to his or her child will be tax-free only up to €414,799, down €19,300 from the previous threshold of €434,000.
The new threshold is almost €128,000 lower than the limit that applied before the emergency budget.
The new rules mean that a son or daughter who would have faced a tax bill of zero on an inheritance of €542,000 in early 2009 would have to pay tax of €32,000 if they inherited the same amount this year.
Revenue reassesses the CAT thresholds annually to ensure that they keep pace with general inflation. While this has resulted in annual increases in the threshold in the past, the onset of deflation and falls in the general price level mean that the indexation mechanism will work against taxpayers and in Revenue's favour this year.
The latest revision brings the tax-free inheritance threshold to its lowest level since 2001.
Revenue said that similar thresholds relating to gifts or inheritances between brothers and sisters or from uncles and aunts to nephews would also be cut by 4.5 per cent. These gifts and inheritances will now be taxable above €41,481, down from €43,400 previously and €54,254 before last April.
The limit for other relationships, such as inheritances between unmarried or same-sex couples, or for gifts between friends or distant relatives, falls to €20,740 from a previous level of €21,700.This threshold stood at €27,127 before last April's budget.
Article taken from The Sunday Business Post.