Dwelling House Relief Finance Act 2017 – The Dwelling House Relief is a tax relief measure that was introduced by the Irish government as part of the Finance Act 2017. The purpose of the relief is to provide some relief from inheritance tax to individuals who inherit a dwelling house from a deceased person.
The relief is intended to help beneficiaries who may otherwise face a large tax bill when inheriting a family home. The relief is subject to certain conditions, including that the property must have been the main residence of the deceased and that the beneficiary must have occupied the property as their main residence for a certain period of time.
The Dwelling House Relief is an important measure for many families in Ireland, and it is important to understand the conditions and requirements for claiming the relief.
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Dwelling House Relief Finance Act 2017 Eligibility Criteria
To be eligible to claim the Dwelling House Relief under the Finance Act 2017, you must meet the following criteria:
- You must have inherited a dwelling house from a deceased person.
- The property must have been the main residence of the deceased at the time of their death.
- You must have occupied the property as your main residence for a continuous period of three years prior to the date of inheritance.
- You must not have disposed of the property before making a claim for relief.
- The value of the property must not exceed the cap of €225,000.
If you meet these criteria, you may be able to claim relief from inheritance tax on the property. It is important to note that the relief only applies to dwelling houses and not to other types of property or assets. The relief also does not apply to rental properties or holiday homes.
If the property was not the main residence of the deceased, or if you did not occupy the property as your main residence for the required period, you will not be eligible for the relief. In addition, if the value of the property exceeds the cap of €225,000, you will only be able to claim relief on the portion of the property that falls within the cap.
It is recommended that you seek professional advice from a tax advisor or solicitor if you are unsure whether you meet the eligibility criteria for the Dwelling House Relief.
Calculation of the Relief
The Dwelling House Relief under the Finance Act 2017 provides relief from inheritance tax on a portion of the value of a dwelling house inherited from a deceased person. The relief is calculated as follows:
- Determine the proportion of the property that was the main residence of the deceased. This is usually calculated as a percentage of the total floor area of the property.
- Apply the relief rate of 100% to the proportion of the property that was the main residence of the deceased.
- Multiply the relief rate by the value of the proportion of the property that was the main residence of the deceased.
- Subtract the relief amount from the value of the property to determine the taxable value.
The maximum amount of relief available under the Dwelling House Relief is €225,000. This means that if the value of the inherited property is less than or equal to €225,000, the relief will cover the full amount of the inheritance tax liability. If the value of the property exceeds €225,000, the relief will only cover the first €225,000 of the inheritance tax liability, and the remainder will be subject to the usual inheritance tax rates and thresholds.
The relief only applies to the proportion of the property that was the main residence of the deceased, and not to any other parts of the property or to any other assets inherited by the beneficiary.
Limitations and Exclusions
The Dwelling House Relief under the Finance Act 2017 has certain limitations and exclusions that should be considered. Here are some of the key points to be aware of:
Non-qualifying property
Only dwelling houses that were the main residence of the deceased can qualify for the relief. This means that rental properties, holiday homes, and other types of property are excluded from the relief.
Time limits
To be eligible for the relief, the beneficiary must have occupied the property as their main residence for a continuous period of three years prior to the date of inheritance. If the property is sold within six years of the date of inheritance, the relief may be subject to a clawback of the tax relief.
Value limits
The maximum value of the property that can qualify for the relief is €225,000. If the value of the property exceeds this amount, the relief will only apply to the first €225,000 of the property value.
Disposal of the property
If the beneficiary disposes of the property within six years of the date of inheritance, the relief may be subject to a clawback of the tax relief.
Joint ownership
If the property is jointly owned by the deceased and another person who is not the beneficiary, the relief may be restricted to the proportion of the property that was owned by the deceased.
Other tax liabilities
The relief only applies to inheritance tax liability and does not affect other tax liabilities, such as income tax, capital gains tax, or stamp duty.
These limitations and exclusions may vary depending on the specific circumstances of each case, and it is recommended that you seek professional advice from a tax advisor or solicitor to determine your eligibility for the Dwelling House Relief.
Implications for Beneficiaries
The Dwelling House Relief under the Finance Act 2017 can have significant implications for beneficiaries of inherited property. Here are some of the key implications to consider:
Reduced inheritance tax liability
The relief can significantly reduce the amount of inheritance tax that the beneficiary is required to pay on the inherited property, up to a maximum of €225,000.
Financial benefit
The reduction in inheritance tax liability can provide a significant financial benefit to the beneficiary, allowing them to retain more of the value of the inherited property.
Timing considerations
To be eligible for the relief, the beneficiary must have occupied the property as their main residence for a continuous period of three years prior to the date of inheritance. This may require careful planning to ensure that the property is occupied as the main residence for the required period.
Clawback provisions
If the property is sold within six years of the date of inheritance, the relief may be subject to a clawback of the tax relief. This means that the beneficiary may be required to repay some or all of the tax relief if the property is sold within six years of inheritance.
Other tax liabilities
It is important to note that the relief only applies to inheritance tax liability and does not affect other tax liabilities, such as income tax, capital gains tax, or stamp duty.
Joint ownership
If the property is jointly owned by the deceased and another person who is not the beneficiary, the relief may be restricted to the proportion of the property that was owned by the deceased.
Professional advice
It is recommended that beneficiaries seek professional advice from a tax advisor or solicitor to determine their eligibility for the Dwelling House Relief and to understand the implications of the relief for their specific circumstances.
