Dwelling-House Exemption: Inheriting the Family Home CAT-Free (and the 6-Year Trap)
The dwelling house exemption can let you inherit a home in Ireland completely free of Capital Acquisitions Tax (CAT) — no matter how valuable it is — but only if you meet three conditions: you lived in the house as your only or main home for the 3 years before the inheritance, you own no other dwelling, and you keep living in it for 6 years after. Break the six-year rule and the exemption is clawed back at 33%.
This is one of the most valuable reliefs in the Irish CAT code — and one of the easiest to lose by accident. A €500,000 family home that would otherwise eat your entire Group A threshold can pass to you tax-free. But sell it in year four to trade up, and Revenue can come looking for tens of thousands in tax that "wasn't due" at the time. Below I walk through the exact conditions, a full worked example of both outcomes, and the exceptions for older or dependent beneficiaries that most people miss.
The three core conditions
The exemption is set out in Section 86 of the Capital Acquisitions Tax Consolidation Act 2003, heavily rewritten by Finance Act 2016. For an inheritance taken on or after 25 December 2016, you (the beneficiary) must satisfy all three of the following:
| # | Condition | What it really means |
|---|---|---|
| 1 | 3 years before | The house was your only or main home for the 3 years immediately before the date of the inheritance. Actual physical occupation is needed — not just a postal address. |
| 2 | No other dwelling | At the date of the inheritance you are not beneficially entitled to any other dwelling house, or to any interest in another dwelling. Even a small part-share in another property disqualifies you. |
| 3 | 6 years after | The house remains your only or main home for the 6 years after the inheritance (subject to the exceptions below). |
The figure that matters here: there is no cap on the value of the house. If you tick all three boxes, the whole property is exempt — €300,000 or €3 million. That is what makes the relief so powerful for adult children who gave up their own home to move in and care for an elderly parent.
Revenue interprets condition 1 literally. If you kept your own apartment and stayed in your mother's house "most weekends," that is not occupation as your only or main residence. The cleanest qualifying cases are people who genuinely had no other home of their own throughout the three-year window. Keep evidence — utility bills, electoral register, GP and bank correspondence at that address — because the burden of proof is on the beneficiary.
Worked example: the €500,000 home, two endings
Meet Aoife. Aoife, 47, moved back into her widowed father Liam's house in Drogheda in 2021 to care for him, having sold her own apartment. She owns no other property. Liam dies in March 2026 and leaves Aoife the house, valued at €500,000 at the date of death. Aoife has received no prior gifts or inheritances from her parents.
Ending A — Aoife keeps living there (exemption holds).
- Condition 1: she lived there as her only home from 2021 — the full 3 years before March 2026. ✔
- Condition 2: she owns no other dwelling at the date of inheritance. ✔
- Condition 3: she stays put through to 2032 (6 years). ✔
CAT on the house = €0. The €500,000 is fully exempt and is not counted against her €400,000 Group A threshold — so that threshold stays free for other assets she might inherit.
Ending B — Aoife sells in year 4 (2030) to move to Galway. She is under 65 and none of the exceptions apply. Selling within the 6-year window triggers a clawback: the exemption is withdrawn and the house is taxed as if it had never qualified.
- Taxable value of the house: €500,000
- Less Group A threshold (assume unused): −€400,000
- Taxable balance: €100,000
- CAT at 33%: €100,000 × 33% = €33,000
So the price of selling one year early is a €33,000 CAT bill — tax that genuinely was not owed while she stayed in the house. (If she had already used her Group A threshold on other assets, the full €500,000 would be taxed, giving CAT of €165,000.)
The lesson: the exemption is not "earned" the day you inherit. It is provisional for six years. Selling, moving out long-term, or even letting the property as an investment inside that window can pull the relief back.
The replacement-home let-off
There is one important softener. If you sell within the six years but use the full sale proceeds to buy a replacement dwelling that you then occupy as your only or main home for the balance of the period, the exemption is not clawed back. The relief effectively follows you into the new home. The proceeds must be reinvested in full — pocketing part of the cash breaks it.
Why this mostly applies to inheritances now, not gifts
Before Finance Act 2016 the dwelling house exemption applied to gifts too, and was widely used for living parents to transfer the family home to a child CAT-free. That door is largely closed. For benefits taken on or after 25 December 2016, the exemption applies to inheritances only — with one carve-out.
A gift of a dwelling house can still qualify, but only if it is gifted to a dependent relative. Revenue defines a dependent relative as a person who is either:
- aged 65 or over at the date of the gift, or
- permanently and totally incapacitated, by reason of mental or physical infirmity, from maintaining themselves.
For everyone else, lifetime transfers of a home are now treated as ordinary gifts and taxed against the relevant group threshold. If you are planning, assume the exemption is an inheritance tool and structure the will accordingly — don't bank on gifting the house early.
The 65+ and dependent-relative exceptions to the 6-year rule
The continued-occupation clawback (condition 3) does not apply if, at the date of the inheritance, the beneficiary is aged 65 or over. This is a meaningful relaxation — the threshold used to be 55 before Finance Act 2016. An older beneficiary who inherits a qualifying home can sell or move without losing the relief, provided conditions 1 and 2 were met.
Two further points clients often confuse:
- Moving out for care. If the beneficiary later has to leave the house because of long-term mental or physical infirmity — for example, moving into a nursing home — that is not treated as ceasing to occupy for clawback purposes.
- The exception is about the clawback, not the entry test. Being over 65 does not waive conditions 1 and 2. You still need the 3 years of prior occupation and no other dwelling to get the exemption in the first place.
How it interacts with your Group A threshold
This is where the exemption quietly doubles its value. Each beneficiary has a lifetime, group-based tax-free threshold. The Group A threshold — for children inheriting from a parent — is €400,000 for benefits taken on or after 2 October 2024. Group B is €40,000 and Group C is €20,000. Anything above your threshold is taxed at 33%.
| Group | Relationship to disponer | Tax-free threshold (from 2 Oct 2024) |
|---|---|---|
| A | Child (incl. certain foster/step) of the disponer | €400,000 |
| B | Brother, sister, niece, nephew, lineal ancestor/descendant | €40,000 |
| C | Everyone else (cousins, friends, in-laws) | €20,000 |
Crucially, when the dwelling house exemption applies, the value of the exempt house is taken outside the CAT net entirely — it does not consume any of your threshold. So in Aoife's Ending A, the €500,000 home is tax-free and her full €400,000 Group A threshold remains available for the cash, shares, or other property she might inherit from either parent over her lifetime. That can be the difference between a six-figure CAT bill and nothing.
Suppose Aoife also inherits €350,000 in cash from Liam alongside the qualifying house.
- House: €500,000 — exempt, uses €0 of threshold.
- Cash: €350,000 — sits under her €400,000 Group A threshold.
- Total CAT = €0.
Without the exemption, the house would have used up the threshold and then some: €500,000 + €350,000 = €850,000, less €400,000 = €450,000 taxable at 33% = €148,500 of CAT. The exemption is doing all the heavy lifting.
- Three conditions, all required: 3 years' prior occupation as your only/main home, no interest in any other dwelling, and 6 years' continued occupation after.
- The exempt house has no value cap and does not use any of your Group A €400,000 threshold.
- The 6-year clawback is the trap: selling early can crystallise tax — €33,000 in our €500,000 example after the threshold, or €165,000 if the threshold is already used.
- Reinvesting the full proceeds into a replacement home preserves the relief.
- Post-2016, the relief is essentially an inheritance tool — gifts only qualify if made to a dependent relative (65+ or permanently incapacitated).
- Beneficiaries aged 65+ at the inheritance date, or those who later move out due to infirmity, are not caught by the continued-occupation clawback.
Sources
- Revenue.ie — Exemption for a dwelling house
- Revenue CAT Manual — Section 86: Exemption relating to certain dwellings
- Revenue.ie — CAT group thresholds (€400,000 / €40,000 / €20,000 from 2 Oct 2024)
- Revenue.ie — CAT rate of 33%
Frequently asked questions
Is there a maximum house value for the dwelling house exemption?
No. If all three conditions are met, the entire value of the house is exempt from CAT regardless of how much it is worth, and it does not use up any of your group threshold.
What happens if I sell the house within six years?
The exemption is normally withdrawn (clawed back) and the house is taxed as if it had never qualified — at 33% above your threshold. The exception is if you reinvest the full sale proceeds into a replacement home that you occupy for the rest of the period, or if you were aged 65 or over at the date of the inheritance.
Can my parents gift me the family home tax-free while they are alive?
Generally not under this exemption. Since 25 December 2016 the relief applies to inheritances only. A gift of a dwelling house qualifies only where it is made to a dependent relative — a person aged 65 or over, or permanently and totally incapacitated.
I own a small share in a buy-to-let with my brother. Can I still claim it?
No. Being beneficially entitled to any other dwelling, or to any interest in another dwelling, at the date of the inheritance disqualifies you — even a small part-share. You would need to dispose of that interest before the inheritance to qualify.
Does the exemption use up my €400,000 Group A threshold?
No. An exempt dwelling house is taken outside the CAT calculation entirely, so your full Group A threshold of €400,000 (from 2 October 2024) remains available for other assets you inherit.
I'm 68 and just inherited the house I live in. Am I locked in for six years?
No. The continued-occupation (6-year) requirement does not apply to a beneficiary aged 65 or over at the date of the inheritance, provided the other conditions were met. You can move or sell without triggering a clawback.
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