Gifted Deposits and Gift Tax (CAT) in Ireland

A gifted deposit is money a family member gives you (not lends you) toward your home. Lenders accept it, but they need a signed letter confirming it is a genuine gift with no repayment expected. On tax: a child can receive up to €400,000 from parents over their lifetime before gift tax (Capital Acquisitions Tax) applies, plus a separate €3,000 per year from any person that does not count against that. So a typical parental deposit gift is usually tax-free.

Many first-time buyers get help with the deposit from parents. Two things matter: what your lender needs to see, and whether any tax arises.

What the lender needs: a gift letter

Lenders distinguish a gift from a loan. A loan is a debt that eats into how much you can borrow; a gift does not. So the money must genuinely be a gift, and the lender will ask the giver to sign a gift letter confirming: - the amount and who it is from, - that it is a gift with no repayment expected, and - that the giver retains no claim or interest in the property.

A gift you have to pay back is not a gifted deposit, and presenting one as a gift when it is really a loan is a problem for your mortgage. Lenders may also want to see the funds and your own savings history.

The tax side: Capital Acquisitions Tax (CAT)

Gifts can be subject to Capital Acquisitions Tax (gift tax), charged at 33% above tax-free thresholds. The threshold depends on your relationship to the giver:

• Group A (parent to child): €400,000 over the child's lifetime. This is the usual case for a deposit gift, and it is generous, so a typical deposit from parents is normally well within it.
• Other relationships (e.g. from a grandparent, sibling, aunt or uncle, or unrelated person) have much lower lifetime thresholds, so a large gift from outside the parent relationship is more likely to use up the allowance.

The threshold is a lifetime running total of gifts and inheritances within that group, so a big deposit gift today reduces what can later pass tax-free (for example an inheritance).

The €3,000 small gift exemption (use it)

On top of the lifetime threshold, the small gift exemption lets you receive up to €3,000 per year from each person, tax-free, and it does not count against the €400,000. Two parents can therefore gift €6,000 a year between them outside the lifetime threshold. Families planning ahead often use this each year.

Filing

You generally only have to file a CAT return (Form IT38) when the total of your gifts and inheritances within a group exceeds 80% of the threshold (so, for Group A, once you pass €320,000). Below that, there is usually nothing to file for a deposit gift, but keep a record.

This guide is general information, not tax advice. Thresholds and rules change, so confirm the current figures with Revenue, and ask your lender exactly what form of gift letter they require.