CGT question and house ownership

[icycool25]

Hi all,

My parents own a house that was bought at €x and is now valued at ,€y euro where y>x. They still have a mortgage on the house for ,€z euro. Technically this is still my home residence ( always has been). I am in a position to repay the entire ,€z euro. Will that mean I own z/x (so the fraction of the mortgage repaid) of the house or z/y (a fraction of the marketvalue)? If they were to sell the house later, how would cgt apply, especially as it is still my home address aswell?

Thanks very much

 

[theknowingness]

@icycool25 Usually house ownership is assigned when signing contracts with the solicitor so mortgage repayments and ownership are separated. Legally, you wouldn't own any part of the house no matter how much of the mortgage you pay. But this would probably be considered a gift and there may be gift tax applied to the amount you pay off.

If they sell it, there would be no CGT as it is there primary residence.

 

[icycool25]

@theknowingness And if they were to sign over ownership? Are there cgt implications? Can my parents just decide I own 25%?

 

[theknowingness]

@icycool25 That would probably fall under inheritance/gift tax. There is a limit a parent can give to their child and then everything above that limit is taxed.

 

[danielps]

@theknowingness So for example in a few yrs time when my mortgage is paid off I could sell my house n not be liable for cgt?

 

[theknowingness]

@danielps Houses are CGT exempt if they're your primary residence. If you live there, you don't pay CGT. If you don't live there and rent it out, then you would be liable for CGT on the house.

 

[xsmbthu3hoa]

@theknowingness Out of curiosity.... do you know how that works if you either buy and move abroad, or buy while abroad, and move home? e.g. does it have to be your primary residence when you buy it, or when you sell it, or for a certain number of years prior to the sale?

 

[theknowingness]

@xsmbthu3hoa I'm not sure, I know if you lived in Ireland and lived in a house for a while followed by a period of renting, then you use the number of years you lived in the house versus not living in the house to work out a percentage where it was your primary residence. If it is 50%, then you owe CGT on 50% of the amount you sold the house for. I'm not sure if living abroad would change this rule. It probably wouldn't seeing as your gains were made in Ireland so Ireland would expect CGT.

 

[xsmbthu3hoa]

@theknowingness Cool, good to know, thanks !

 

[4myrecovery]

@icycool25

Will that mean I own z/x (so the fraction of the mortgage repaid) of the house or z/y (a fraction of the marketvalue)?

You would own nothing unless you sign a contract with your parents and change the deeds.

Paying off the mortgage will just see the banks lean released.

 

[bonniebaker92]

@4myrecovery This would be also my understanding.otherwise why couldn't I make the repayment and claim ownership? You would have to speak to your parents and change the deed so you are a partial owner before you make the repayment.

 

[njehia]

@icycool25 Your parents could sell you a share in the house with a value equal to the amount of the outstanding mortgage. They could then use that money that you pay for this share to pay it off. There would be no CGT for them as it is their principal private residence and no CAT for you provided it is done at market value. It’s messy though and would require a good solicitor to document it properly. They would also need to correspond with the bank as the bank will have to agree to the transaction as it has a charge over the property until it is paid off.

I suppose the question I have is why do you want to do this? Is it to do something nice for your parents or to secure a share of the house? If it’s the latter you would need to understand what your parents’ plans for the house are when they die. It could get very messy if there are siblings or others involved and it might not be particularly tax efficient.

 

[memberofthebodyofchrist]

@icycool25 If you’re asking for your parents to gift you a house, you will obviously have to pay gift tax (CAT).

If you want to buy it off them, or even just buy part of it you need to pay the market rate, otherwise the difference in price would be considered a gift, and you’d have to pay CAT.

There shouldn’t be any CGT implications when your parents decide to sell assuming they’re also living there and qualify for principal private residence relief.

 

[rainfallsoneveryone]

@icycool25 No CGT will apply when they sell if its their only home. Look up Principal private residence relief

 

[icycool25]

@rainfallsoneveryone Ok but if I want to be on the deeds, I can see I need to pay stamp duties. Can my parents give me part ownership of the house?

 

[idk332]

@icycool25 Why though? Do you have siblings that the house will be divided by. It would be better off to just continue living there and inherit the house under the rules for inheritance

 

[rainfallsoneveryone]

If u inherit the house. The PPR relief will transfer to you if ur living in the house for x number of years