My son is Irish and is living, working, residing and a permanent resident of Canada. He is planning to get married to his Canadian fiancée next year. My husband and I would like to contribute a decent amount to help pay towards the wedding costs.
Could you help me in regards to any tax implications and also will it affect his inheritance threshold?
Ms V.F., email
Organising a wedding is taxing at the best of times. Trying to help out across international borders can be even more fraught, especially in a pandemic when there are so many restrictions on what people can and cannot do.
The good news is that your son’s wedding next year promises to be in an altogether more upbeat environment now that vaccination programmes are up and running.
It is still very common for parents to try to help couples out financially with the cost of a wedding – even if society generally has moved on from the rather prescriptive allocation of financial burdens to the parents of the bride (largely) and groom. But rules about what adult children can expect in financial support have been tightened and then, of course, there is the question of different tax rules that might apply in different countries.
It’s important because weddings can be very costly. “Average” is one of those dangerous words but, according to a number of sources, a wedding in Canada can easily cost between 20,000 and 30,000 Canadian dollars (€13,368 – €20,000). That’s not far off the deposit on a home for a first-time buyer and we’re all aware of how difficult that can be to save.
The good news from the Canadian point of view is that there is no gift tax on cash gifts. Things get a bit more complicated when you're dealing with physical property but that's not an issue for you here. So, from your son's perspective there is no Canadian tax issue.
Restricted
Things are not so straightforward when we look at Irish tax law. Revenue has clamped down in recent years on loopholes that allowed wealthy parents to financially support their adult children to a large extent. The scope for such support is now much more restricted and any excess is assessed under capital acquisitions tax – better known for most of us as inheritance tax or gift tax.
It says that any support above €3,000 a year will count against the recipients’ tax threshold – €335,000 for a child from their parents over their lifetime.
However, in relation to your son’s wedding, this will not be something you have to worry about. Parental contributions to wedding costs are among the very limited exceptions to the tighter Revenue rules on gifts. So you are free to provide financial support to cover wedding costs.
As Revenue puts it: “Revenue takes the view that this is the expense of the parent rather than a gift to the child. Therefore, there are no gift tax implications. This extends not just to the cost of catering for guests but also to all of the costs associated with the occasion.”
Draw a line
But it's not full carte blanche. The Irish tax authorities do draw a line at parent's buying a child a car or a house for their wedding, should they be so inclined and able to afford. More relevant, perhaps, they are not as forgiving on money given to a couple to spend on their honeymoon.
In all these cases, the €3,000 small gift exemption limit applies. Anything beyond that is assessed under inheritance tax thresholds.
The fact that you are in Ireland, as is the case, means any such spending above Revenue limits would adversely impact your son's inheritance tax threshold.
Finally, from your own tax perspective, there is nothing to worry about.
