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There comes a time when many of us want to give back to our parents, recognising all the ways they’ve supported us over the years. From raising us and helping with our education to lending a hand financially—whether it was for our first car, first home, or just during tough times—they’ve always been there when we needed them most.
If you’re thinking of giving money to your parents—whether it’s to help them with daily expenses or simply as a generous gift—did you know there’s a way to do this without paying or reducing taxes? Yes, and this is where smart tax planning comes in handy.
Situations Where Gifting Money to Your Parents Makes Sense
Financial support can be one of the most meaningful ways to reward or assist your parents for all they have done, especially if they’re facing financial stress or could use extra help to enjoy their later years more comfortably.
But when does it make sense to step in and offer financial support? Understanding the right moments to help can ensure that your generosity truly benefits them. Here are some common situations where gifting money to your parents could make a real difference.
Helping with daily expenses
As parents age, their financial situation may not be as stable as it once was. Everyday costs like groceries, utilities, fuel, healthcare costs and home maintenance can become overwhelming, especially if they’re relying on a fixed income.
If you notice them cutting back on necessities, avoiding social outings, or struggling to cover basic expenses, offering financial support—even in a small way—can help relieve their stress.
Covering their grocery bill, and setting up automatic payments for essential utilities, for household needs are simple yet impactful ways to ease their financial burden and improve their quality of life.
Contributing to their retirement
Many people assume that once their parents retire, they’ll have enough pension savings to sustain them comfortably. Unfortunately, that’s not always the case. Rising living costs, unexpected expenses, and a lack of retirement planning earlier in life can leave some retirees struggling to make ends meet.
This is especially true for those who rely solely on the state pension, which could provide around €1,200 per month or approximately €15,000 per year. While this may cover basic expenses, it often falls short when it comes to medical bills, home maintenance, or even enjoying life without financial stress.
If your parents’ pension income isn’t enough to meet their needs, a financial contribution from you could provide them with the breathing room they need to live their retirement years with comfort and dignity.
Helping with mortgage repayments
Many parents still have outstanding mortgage repayments well into retirement, which can put a strain on their finances—especially if their income has decreased.
If your parents are struggling to keep up with their monthly payments or worrying about losing their home, stepping in with financial support could be life-changing for them. Even a small contribution towards their mortgage could reduce stress, give them greater financial security, and help them stay in the home they’ve built memories.
Funding a special occasion
Not all financial gifts have to be about covering expenses—sometimes, it’s about giving your parents the chance to enjoy something special. Maybe they’ve always dreamed of going on a once-in-a-lifetime holiday but never had the financial flexibility to make it happen.
Or perhaps they have a milestone birthday or anniversary coming up, and you want to give them the celebration they deserve. Contributing towards a memorable experience—whether it’s a trip, a family gathering, or even a luxury purchase they wouldn’t normally treat themselves to—can be one of the most rewarding ways to support them financially.
It’s not just about the money; it’s about giving them the opportunity to enjoy life’s special moments without worrying about the cost.
Bridging the Gap After You Move Out
If you used to contribute to household expenses while living with your parents—whether by helping with rent, groceries, or bills—they may feel the financial gap once you move out.
Many parents don’t openly discuss their struggles, but they might be quietly cutting back on spending or dipping into their savings to cover costs they once split with you.
If you notice them making adjustments, offering financial support—even occasionally—can help them adjust to the new financial reality without feeling overwhelmed.
Reducing Financial Pressure After a Loss
Losing a spouse is not only an emotional loss but often a financial one as well. If your surviving parent is struggling to manage expenses after losing their partner’s income or pension, stepping in with financial assistance—whether short-term or ongoing—can help them adjust to their new financial reality without unnecessary stress.
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How can a child gift money to a parent in a tax-efficient way?
In Ireland, if a child gifts money to a parent, it may be subject to Capital Acquisitions Tax (CAT), also known as inheritance or gift tax. CAT applies when someone receives a gift or inheritance above a certain tax-free threshold. For gifts from a child to a parent, the Group B threshold applies, which is €40,000 (as of 2025). Any amount above this is taxed at 33%.
However, if the parent inherits from a child who had previously received a gift or inheritance from that parent in the five years before their death, the Group A threshold of €400,000 may apply instead.
Make Use of Small Gift Exemption
The annual Small Gift Exemption allows you to gift up to €3,000 per calendar year without having to pay Capital Acquisition Tax (CAT).
This doesn’t have to be in a single transaction; you can, for example, give 10 payments of €300.
If a gift is over the €3,000 Small Gift Exemption, only the extra amount is taxed under Capital Acquisitions Tax (CAT).
This exemption applies only to gifts, not inheritance tax.
Also, gifts under this exemption don’t affect the €40,000 lifetime tax-free threshold for children gifting to parents.
Example 1:
James and his sister Sarah each decide to give their mother €3,000 for her 70th birthday. Since the Small Gift Exemption applies per person, their mother receives €6,000 in total, completely tax-free!
Example 2:
Emma wants to give money to her parents without paying taxes. She can gift €3,000 to her mom and €3,000 to her dad—a total of €6,000 tax-free.
In this case, the Small Gift Exemption allows each parent to receive €3,000 per year from each child without paying tax. Since Emma is giving €3,000 to each, there’s no tax due.
How to Gift €12,000 in One Year to Your Parents Tax-Free
You can gift up to €12,000 to your parents in one year completely tax-free by using the Small Gift Exemption, which allows €3,000 per year per person.
Here’s how it works:
- A son can give €3,000 to his father.
- The son’s wife (daughter-in-law) can also give €3,000 to her father-in-law.
- The son can give another €3,000 to his mother.
- The son’s wife can also give €3,000 to her mother-in-law.
Since each gift is within the €3,000 exemption limit, no Capital Acquisitions Tax (CAT) applies, and it does not reduce the parent’s lifetime tax-free threshold (€40,000 for gifts/inheritance from a child to a parent). This is a simple way to transfer money to parents without tax concerns.
If you have siblings, you can combine your gifts to give your parents even more money tax-free. Each child can gift €3,000 per parent per year under the Small Gift Exemption, meaning multiple siblings can significantly boost how much your parents receive.
For example, if you and two siblings each gift €3,000 to your mom and €3,000 to your dad, your parents could receive a total of €18,000 per year without paying any tax. This is a simple and legal way to put more money in their pockets while avoiding Capital Acquisitions Tax (CAT).
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Support Your Parents and Lower Your Taxable Income with Deed of Covenant
A Deed of Covenant is a legal way to regularly support a parent or someone in need while getting tax benefits. It’s a win-win—the giver (child) can lower their taxable income, and the receiver (parent) could get tax-free income in certain cases.
You can claim relief on covenants to one or more adults aged 65 or over however, the total relief is capped at 5% of your income.
Covenants can also be made to permanently incapacitated minors (under 18 and unmarried) and permanently incapacitated adults. However, payments to your own incapacitated child do not qualify for tax relief.
Who Should Consider a Deed of Covenant?
- Children in the 40% tax bracket looking to reduce their taxable income.
- Parents over 65 with low income who can receive tax-free money.
- Families aiming to reduce overall tax liabilities.
How Tax Relief Work
When a child sets up a Deed of Covenant to support a parent over 65, there are two key tax rules at play:
5% Limit on Tax Relief (For Payments to Parents Over 65)
- You can only claim tax relief on payments up to 5% of your total income.
- For instance, if your income is €60,000, the maximum amount you can covenant for tax relief is €3,000 (€60,000 × 5%).
- If you covenant more than 5% of your income, you won’t get tax relief on the extra amount.
40% Tax Savings (for Higher Earners)
- If you are in the higher tax bracket (40%), the amount you covenant up to the 5% limit is deducted from your taxable income.
- That means you save 40% of that amount in tax.
How Much Can You Save with a Deed of Covenant?
Here’s a simple example of how a Deed of Covenant could help both you and your parent save on tax.
Example:
- Your income: €60,000 per year
- Amount covenanted to your parent (over 65): €3,000 (the max allowed, as it’s 5% of your income)
- Your tax bracket: 40%
- Your parent’s income: Below the tax-free limit of €18,000 (for a single person in 2025)
Step 1: Your Tax Savings
- The €3,000 you covenant reduces your taxable income to €57,000.
- Since you’re in the 40% tax bracket, you save €1,200 in tax (€3,000 × 40%).
Step 2: Parent’s Benefit
- You must withhold 20% (€600) in tax from the €3,000 and send it to Revenue.
- But since your parent earns less than €18,000, they can reclaim the €600 from Revenue.
- This means your parent receives the full €3,000 tax-free.
Total Family Savings
- You save €1,200 in tax.
- Your parent gets €3,000 tax-free (after reclaiming €600).
- Total savings: €1,800!
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Can I use both the Deed of Covenant and the Small Gift Exemption to give money to my parents?
Yes, you can use both the Deed of Covenant and the Small Gift Exemption to give tax-efficient financial support to your parents.
Which Option Is Best for Me?
It depends on your situation. Here’s a breakdown of the benefits of each:
Deed of Covenant:
- Ideal if your parents are over 65 and have low income (below €18,000 for a single parent in 2025).
- Allows you to reduce your taxable income, saving up to 40% in tax relief (if you’re in the higher tax bracket).
- Provides your parents with tax-free income if they stay within the exemption limit.
- Must last at least 6 years to qualify for tax relief, so it requires a long-term commitment.
Small Gift Exemption:
- A simple and flexible way to transfer up to €3,000 per parent per year tax-free.
- No paperwork or tax filing required.
- Can be used alongside a Deed of Covenant to maximise tax-free support.
- No time commitment—you can gift money whenever you choose.
The examples in this blog are for informational purposes only and serve as general guidelines. Everyone’s financial situation is unique, and the best strategy depends on your personal circumstances, income, and goals.
For tailored advice that fits your needs, contact our experienced financial advisors at True Wealth—we’re here to help you make the most of your money.
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Tax planning is a key part of a strong financial plan, and we can help you make the most of your money. With the right strategy, you could save thousands through smart tax relief options, efficient gifting, estate and succession plan, and long-term wealth planning.
Don’t leave your finances to chance—get a personalised financial plan with True Wealth today!
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All our content has been written or overseen by a qualified financial advisor. However, you should always seek individual financial advice for your unique circumstances.
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