Tax exemption for qualifying expenses of incapacitated individuals

Tax exemption for qualifying expenses of incapacitated individuals - Crowe Horwath Ireland

An exemption from Capital Acquisitions Tax (CAT) is available on gifts and inheritances which are taken exclusively for certain medical and related expenses of an individual who is permanently incapacitated by reason of physical or mental infirmity.

Medical care expenses, and the cost of maintenance in relation to such medical care, are deemed to be qualifying expenses.

There a number of different conditions which must be met for the exemption to apply:

  • The individual in receipt of the gift or inheritance must be permanently incapacitated by reason of physical or mental infirmity
  • It must be the intention of the disponer (someone who disposes of an asset) providing the gift or inheritance that it is used to discharge qualifying expenses. Where this intention is not recorded prior to the gift or inheritance, CAT will apply.
  • Where the gift or inheritance is used for something other than qualifying medical expenses, the exemption will not apply to this portion of the gift / inheritance. It is possible for a portion of the gift / inheritance to be exempt and a portion to be subject to CAT.

For additional information please contact a member of the tax team.