The Dwelling House Exemption in Ireland

When someone inherits a home in Ireland, the first tax that usually comes to mind is Capital Acquisitions Tax (CAT), also known as inheritance tax. At a rate of 33%, CAT can place a huge burden on beneficiaries who inherit valuable properties.

Fortunately, Irish law provides an important relief known as the Dwelling House Exemption. If the strict conditions are met, this relief can completely eliminate CAT on an inherited home.

At Irish Tax Hub, we regularly help clients understand whether they qualify for this relief, structure their estate plans to meet the conditions, and handle the necessary Revenue filings. In this article, we’ll explain everything you need to know about the Dwelling House Exemption for CAT in Ireland.

What is the Dwelling House Exemption?

The Dwelling House Exemption is a relief under Irish Capital Acquisitions Tax rules. It allows a person to inherit a house tax-free, provided they meet specific residency and ownership conditions.

Without this exemption, the beneficiary could face a 33% CAT charge on the full market value of the property - often leading to forced sales just to pay the tax.

Who Can Claim the Exemption?

The Dwelling House Exemption applies if the person inheriting the property:

1. Lived in the house as their main residence for at least 3 years prior to the inheritance.
2. Does not own (or acquire) another dwelling house at the time of the inheritance.
3. Continues to occupy the house as their main residence for 6 years after the inheritance.

If these conditions are met, the inheritance of the house is fully exempt from CAT, no matter the value of the property.

Example: How the Dwelling House Exemption Works

• Anna has lived with her elderly aunt in Dublin for the past 8 years.
• The aunt passes away in 2025, leaving the house worth €500,000 to Anna.
• Normally, Anna would face a 33% CAT bill on the value above her Group B threshold (€32,500) - that’s over €150,000 in tax.

✅ But because Anna has lived in the home for more than 3 years, doesn’t own another house, and continues to live there, she qualifies for the Dwelling House Exemption.

Result: No CAT is due.

Important Conditions & Pitfalls

While powerful, the exemption has strict conditions:

• Residency requirement: The beneficiary must have lived in the property as their main residence for 3 years before the inheritance. Casual or temporary residence won’t qualify.
• No other property ownership: Owning another house - even abroad - may disqualify you.
• Six-year rule: After inheriting, the beneficiary must continue to live in the house for 6 years. Moving out early could cause Revenue to claw back the exemption.
• Exceptions: Some relief applies if the beneficiary is forced to move due to employment or health reasons, but professional guidance is essential.

How It Differs From CGT Relief

Many people confuse the Dwelling House Exemption (CAT) with Principal Private Residence Relief (CGT).

• CAT (Inheritance Tax): Dwelling House Exemption can eliminate CAT when you inherit a property.
• CGT (Capital Gains Tax): Selling your own principal residence is exempt from CGT.

At Irish Tax Hub, we make sure our clients understand the difference and plan for both taxes — often in the same estate plan.

Planning Opportunities with Dwelling House Exemption

1. Protecting Family Homes
   Heirs who live with parents, grandparents, or other relatives may be able to inherit the home tax-free, avoiding a huge CAT bill.
2. Estate Planning for Parents
   Parents can structure wills to ensure children who live at home qualify for the exemption, while other assets are divided separately.
3. Avoiding Forced Sales
   Without the exemption, heirs often have to sell the inherited property just to cover the inheritance tax bill. The exemption helps keep homes in the family.
4. Combining Reliefs
   In some cases, families can combine Dwelling House Exemption with Business Relief or Agricultural Relief for comprehensive inheritance tax planning.

How Irish Tax Hub Can Help

At Irish Tax Hub, we provide expert advice on inheritance tax and the Dwelling House Exemption. Our services include:

• Eligibility Reviews: We confirm whether you (or your heirs) meet the exemption conditions.
• Revenue Compliance: We prepare and file Form IT38 for inheritance tax, ensuring the exemption is properly claimed.
• Six-Year Rule Support: We advise on keeping the exemption safe and avoiding clawbacks.
• Combined CGT & CAT Planning: We look at the full picture to minimise both taxes.

Frequently Asked Questions (FAQs)

Q1: Do I have to pay inheritance tax if I inherit my parent’s house in Ireland?
Not necessarily. If you meet the Dwelling House Exemption conditions, you may avoid CAT completely.

Q2: What if I already own my own home?
Owning another property usually disqualifies you from this exemption.

Q3: What happens if I move out before the 6 years are up?
The exemption can be clawed back, and Revenue may demand CAT plus interest.

Q4: Can siblings use the exemption?
Yes, if one sibling lives in the family home for 3 years before inheritance and continues to live there, they can qualify.

Q5: Does this exemption apply to investment properties?
No. It applies only to the principal residence of the deceased and the beneficiary.

Conclusion

The Dwelling House Exemption for Capital Acquisitions Tax in Ireland is one of the most valuable inheritance tax reliefs available. It can save families from crippling 33% tax bills and ensure homes stay within the family.

However, the rules are strict, and even a small mistake can mean losing the relief. That’s why professional guidance is essential.

👉 Contact Irish Tax Hub today for expert advice on the Dwelling House Exemption, CAT planning, and estate structuring. Don’t risk a tax bill that could have been avoided - let our specialists protect your family home and your inheritance.