Family loans and rent-free homes: when they count as gifts

An interest-free loan from a relative is a gift each year, valued at the deposit interest forgone. Close-family loans over €335,000 must be reported.

A loan from a parent at no interest, or a home you live in rent-free, isn't a gift of the money or the house. But the benefit of not paying interest or rent is. For Capital Acquisitions Tax, you're treated as getting a gift every year.

How an interest-free loan is valued

Revenue's guidance on free use and loans sets out the value of the gift. It is the best return the lender could have earned by putting the money on deposit, less any interest you actually pay. You're treated as taking it on 31 December each year until the loan is repaid. In the final year, it is the day before repayment, for the part of the year the loan was outstanding.

An example

A parent lends their daughter €400,000 interest-free towards a house in January 2026. Suppose the best deposit rate available is 2% (rates change; use the rate that applies to you).

No tax is due because it fits within her €420,000 Group A threshold. But €5,000 of it is used each year the loan runs. Over ten years, that would be €50,000. If she pays some interest, the gift is smaller; at the deposit rate, there is no gift.

The €3,000 exemption

The €3,000 small gift exemption is per giver per calendar year and is shared with any other gifts from the same person that year. If the parent also gives a €3,000 cash present, there is no exemption left for the loan benefit.

Reporting loans from close relatives

You must file a Form IT38 return for a specified loan even if no tax is due, when all of these apply:

• the loan is from a close relative (anyone in your Group A or B), or involves a company they or you own
• you're treated as getting a gift from it in the year
• no interest was paid within six months of the end of that year
• the balance on it and any other specified loans is more than €335,000 in the year

The return gives the lender's name, address and tax reference number, and the balance outstanding. In the example, the daughter must file every year the loan is over that amount.

Living rent-free

Living in a relative's property free of rent works the same way. The gift is the market rent less any rent you pay, taken on 31 December each year, or the day before you move out. The small gift exemption applies, and each year's gift counts towards your threshold.

Work it out

• Gift and inheritance tax (CAT) →

Sources

• Revenue: What do you not pay CAT on? (spouses, €3,000 small gift exemption) (checked 25/10/2026)
• Revenue: CAT group thresholds (€420,000 / €44,000 / €22,000 from 7 October 2026) (checked 25/10/2026)
• Revenue: IT38 filing obligations (80% of the group threshold) (checked 25/10/2026)
• Revenue: CAT aggregation rules (prior benefits since 5 December 1991) (checked 25/10/2026)

General information, not tax advice. HeyPenny is not a tax agent.