2026-05-06

I am grateful to have the opportunity to speak on this issue. I know I am not the only TD who has been contacted by parents who want to pass a property from one generation to the next. At its heart, this is not about tax breaks for the wealthy; it is about fairness, stability and the ability of ordinary families to plan their futures without being overwhelmed by financial pressures that are, in many cases, disproportionate and unnecessary. One family contacted me recently and their case illustrates the problem clearly. They own a second property and they want to gift it to their adult child, so that it will become their home. Before they can make the transfer, they face a capital gains tax bill which in their case is somewhere between €70,000 and €75,000. They simply do not have that kind of money. On top of that, they remain liable for tax on the property even when no rent is being collected. This is not an isolated case. This is a hardworking family who have never asked for anything from the State. They work, they pay their taxes, they cover college fees and they contribute to their community. They are not opposed to capital gains tax in principle but a 33% rate on a property they are not selling is excessive by any measure. The reality is stark. Their child is now considering emigrating, leaving behind a good job, because they do not want their parents burdened with a massive tax bill. That is the human cost of the current system. Across the country, families who have worked for decades to build security are finding that transferring a property to their children triggers a tax burden that simply does not reflect the reality of their circumstances. These are not investment properties or speculative assets. In many cases, the property is the only significant asset a family has and the intention is not for profit but for continuity, stability and giving the next generation a foothold in the housing market. We already have models that balance support with safeguards. The vacant property refurbishment grant, for example, requires owners to live or rent out the property for a minimum of five years. That protects the integrity of the scheme while still delivering meaningful help to families and communities. A similar safeguard can and should apply. It is entirely reasonable to require that the property becomes the child's principal private residence for, say, ten years. Such a condition would ensure the measure supports genuine family transfers rather than speculative behaviour. This approach would strike the right balance. It would ease the financial pressure on families who simply want to keep a home in the family while ensuring the tax system remains fair, transparent and resistant to abuse. It would help younger generations put down roots at a time when housing affordability is one of the greatest challenges they face and, crucially, it would allow parents to pass on property without the fear of being hit with a large capital gains tax bill on a gain they never actually receive because the property is not being sold; it is being gifted. Parents should not have to pay capital gains tax when transferring a second property to a son or daughter who will use it as their family home. That is the principle at stake and it is one we should be willing to stand over.

I thank Deputy Scanlon for raising this important issue. I am responding on behalf of the Minister for Finance. The Deputy will be aware that capital gains tax, CGT, is a tax on the gain that arises on the disposal of an asset. The chargeable gain of an asset is the difference between the amount a person received for it - in other words, the sale price - the amount a person paid for it, the purchase price, and any allowable expenses in the meantime. Capital gains tax arises not just on the sale of an asset but also on the transfer or gift of an asset from one individual to another, and that is the issue the Deputy is raising here. Capital gains tax is payable by the disponer of the asset and the current rate is 33%. The first €1,270 of chargeable gains of an individual in any year are exempt from capital gains tax. The rate at which capital gains is charged has varied both upwards and downwards since its introduction back in 1975, and the present rate of 33% has been in place since 2012. It is understood that Deputy Scanlon is referencing a situation where a person is selling a second house, such as an investment property, for the purpose of providing funds to a child to buy their own house and, as such, no relief from capital gains tax applies. While capital gains tax makes up only a small proportion of overall taxes, it is considered an integral part of the overall taxation system due to the need to ensure as broad a tax base as possible. The purpose of capital gains tax is to ensure fairness. It ensures taxation is not focused solely on income tax and that those who benefit from gains in the value of their assets are included within the tax net on an equitable basis. In doing so, we can limit the need for increases in income tax rates and secure the sustainability of the taxation system against future challenges. While capital gains tax is a broad-based tax, which applies across the board to virtually all gains that a person can incur, appropriate reliefs are provided in particular circumstances. For instance, section 604 of the 1997 Act provides relief from capital gains tax on the disposal of a person’s principal private residence. A principal private residence is defined as any dwelling house, together with surrounding land, occupied as gardens or grounds up to an area of 1 acre. There is no requirement to pay capital gains tax on gains accrued if such a house is sold. An individual, married couple or civil partners cannot have more than one principal private residence at any one time. The Deputy should note that there may be difficulties with unintended consequences if the rate of capital gains tax were reduced for one category alone. If that were to happen, it would be difficult to distinguish in legislation such a property from other circumstances where second properties are sold, for example, paying off a loan or providing for a pension. There may also be a possible State aid dimension to such a proposal due to the targeting of the measure. In such circumstances, where a reduction to the overall rate of capital gains tax was necessitated, there would be a significant Exchequer cost. For instance, a 5% reduction would result in a cost to the Exchequer of €436 million.

I thank the Minister of State for her response. I am pointing out that where there is a gain somebody is definitely entitled to pay capital gains tax but, unfortunately, the parent who hands over that property has no gain, gets no money and has to pay out maybe €70,000 or €75,000. In this particular case I raised, they may have to pay out €70,000 or €75,000 in capital gains tax, despite the fact they do not get any funds whatsoever. They are gifting the house to one of their family members. In these times with such pressure on young people and young families to try to get a home for themselves, it is something that should be looked at in the coming budget.

I thank the Deputy for bringing this issue to the House. The rate that capital gains tax is charged at has varied upwards and downwards. The truth is that the existence of capital gains tax can help maintain a balance between the rate of taxation of capital assets and the higher rate of income tax. It can also prevent tax planning behaviour. There are a number of targeted reliefs from capital gains tax, including principal private residence relief as well as retirement relief and revised entrepreneur relief. It is often the case that significant exemptions often require a higher rate to generate an appropriate yield. As the Deputy is aware, the programme for Government commits to maintaining a broad tax base to guard against the need for a countercyclical fiscal policy in the event of a downturn and to prepare for future budgetary challenges related to population ageing. Capital gains tax is part of a system to ensure a wide taxation base reducing the burden on income tax that is tax on labour. I assure the Deputy, as with all taxes, that capital gains tax is subject to ongoing review which involves the consideration and assessment of the rate of capital gains and the relevant reliefs and exemptions from capital gains tax. Capital gains tax policy and legislation are reviewed as part of the annual budget and Finance Bill process, and is part of wider tax policy considerations. That same consideration will take place this year. It will be kept under ongoing review most particularly in light of the upcoming budget. That is an opportunity for the Deputy to make his case.