Dwelling House Exemption

A parent leaves their child the family home worth €700,000. Without any relief, the child pays 33% of €300,000 above the Group A threshold, a CAT charge of €99,000. With the Dwelling House Exemption, the charge is zero. This is the single largest CAT relief most Irish beneficiaries will ever encounter, and it is strictly gated.

This page covers what the exemption is, who qualifies, the three- and six-year tests, worked examples, and the common reasons the exemption is lost.

What the Dwelling House Exemption is

The Dwelling House Exemption removes the inherited dwelling from the CAT calculation entirely, where the beneficiary has been living in the house with the person who died and intends to continue living there.

The exemption is set out in Section 86 of the Capital Acquisitions Tax Consolidation Act 2003. Revenue applies it strictly, and a failed claim produces the full CAT charge on the house, which is frequently the single largest line item in the estate.

The four qualifying conditions

Every one of the four conditions must be satisfied. Missing any one voids the exemption.

1. The property must have been the deceased's principal private residence at the date of death. A holiday home, investment property, or a home the deceased had moved out of before death does not qualify. The home the deceased last lived in as their ordinary home is the home that qualifies.

2. The beneficiary must have lived in the house with the deceased for the three years ending on the date of death, as their only or main residence. Not a second home, not an occasional stay. Three full years, unbroken, continuously up to the date of death. Temporary absences (holidays, a few months away for work or study) are generally permitted if the house remained the beneficiary's ordinary home throughout.

3. The beneficiary must not have any beneficial interest in any other dwelling house at the date of the inheritance. Owning a second property, even a small one, disqualifies the claim. This is the most common failure mode for adult children who bought their own home years before moving back in with an ageing parent.

4. The beneficiary must continue to occupy the inherited house as their only or main residence for six years after the inheritance, unless they are aged 65 or over at the date of the inheritance, required to live elsewhere by reason of employment, or required to live elsewhere because of mental or physical infirmity certified by a doctor.

What the three-year rule really means

The three-year pre-death occupancy rule catches out adult children who move home to care for an ageing parent. If the son moves back in with his mother when she becomes frail at 85, lives with her for two and a half years, and then she dies, the exemption is not available because the three-year residency was not complete.

Caring arrangements typically need to start four years or more before death to safely clear the three-year test. In practice, this means the rule serves long-term cohabitants rather than late-stage carers.

There are some edge cases:

• Time in nursing home care: the beneficiary continues to live in the dwelling; the deceased's move to a nursing home does not break the beneficiary's three-year occupancy clock, provided the beneficiary continues to reside in the house as their main home.
• University terms: a student-aged beneficiary who returns to the family home for all holidays and keeps their main home there is usually treated as continuously resident for three-year purposes.
• Temporary work away: similar treatment where the family home remained the ordinary home.

Revenue looks at the substance, not the label. Keep evidence: utility bills in the beneficiary's name at the dwelling, voter registration, medical records, correspondence addressed there.

What the six-year rule really means

The beneficiary must continue living in the inherited house for six full years after inheriting, as their only or main residence. If they move out, sell, or rent it out within that window, the exemption is clawed back and CAT becomes payable as if the exemption had never applied, unless the beneficiary is aged 65 or over at the date of the inheritance or the move was required by employment or medical infirmity.

The six-year rule is genuinely a six-year tie to the property. It means that many people who qualify in principle should think twice before claiming, because their lives may require them to move within six years (a job relocation, starting a family and needing a bigger place, a relationship change).

Selling the dwelling and buying a replacement main residence within a year is allowed. The proceeds must be reinvested in the replacement within one year, and the replacement must become the beneficiary's main residence for the remainder of the six-year period. The relief applies to the lower of the two properties' values.

Worked example: the exemption applies

A daughter moves back in with her widowed mother in 2020 and continues to live there as her only home, paying her own share of bills and council tax. The mother dies in early 2026 and leaves the daughter the house, worth €600,000, and €40,000 in savings. The daughter owns no other property.

• Inheritance: €600,000 house + €40,000 savings = €640,000
• Dwelling House Exemption applies: the €600,000 house is fully exempt
• Residual inheritance tested against threshold: €40,000
• Group A threshold: €400,000
• CAT due: €0

Provided the daughter stays in the house as her main residence for six years from the date of inheritance, no CAT is ever paid.

Worked example: the exemption fails

A son lives in his own house in Galway. His mother in Dublin falls ill and he spends most weekends caring for her for two years. She dies and leaves him the Dublin family home, worth €550,000, and €100,000 in savings.

• Three-year continuous residence test: failed. The son lived in Galway, not Dublin.
• Dwelling House Exemption: does not apply.
• Inheritance: €650,000
• Group A threshold: €400,000
• Taxable amount: €250,000
• CAT at 33%: €82,500

The son's options are to pay €82,500 to Revenue (possibly by selling the Dublin house) or, if he wants to keep the house, to borrow against it to fund the CAT payment. If the mother had purchased a Section 72 policy during her lifetime, the policy proceeds could have funded the charge tax-free, leaving the son with the house intact.

Common reasons the exemption is lost

The single most common failure is the "other dwelling" disqualifier. A beneficiary who bought a starter home in their twenties, moved back in with an ageing parent, rented out the starter home, and then inherited the parental home, often assumes the rented-out starter home has been effectively disposed of. It has not. Owning any other dwelling, let or otherwise, at the date of inheritance voids the relief.

Second-most-common is the three-year pre-death occupancy failure. Late-stage caring arrangements rarely clear the three-year test.

Third, the six-year post-inheritance rule trips up people who find themselves needing to move within the window. Job changes, relationship breakdowns, new children, and elderly parents of their own are all common reasons the six-year rule fails in practice.

Fourth, substantially improving and then selling the inherited property can be treated as a disposal that ends the six-year clock. Any substantial refurbishment after inheriting should be taken carefully and recorded.

Filing the claim

The exemption is claimed on the beneficiary's own IT38 return, not by the executor and not on the SA2. The beneficiary self-certifies that the conditions are met. Revenue will ask for documentation (utility bills, correspondence, voter registration) if the claim is queried in an audit.

The SA2 filed by the executor still lists the dwelling at full market value at date of death. The exemption does not reduce the value shown on the SA2; it reduces the CAT charge on the beneficiary's IT38.

When you need a solicitor or tax adviser

Use professional advice for any of these cases:

• You are not sure whether the pre-death residence test is satisfied. Getting the wrong answer costs the full exemption.
• The property is above €1 million in value. The stakes are too high for self-assessment.
• There is any dispute among beneficiaries about who gets the house. Disputes need a solicitor, not a tax form.
• The beneficiary has other property but intends to sell it before inheriting. The timing of the disposal relative to the inheritance matters.
• The home includes land or a second residence on the same title. The exemption applies to the dwelling only, not surrounding land beyond what is reasonable for use and enjoyment.