Dwelling House Exemption: plain-English guide for Irish probate

What it means, in plain English

The Dwelling House Exemption, under Section 86 of the Capital Acquisitions Tax Consolidation Act 2003, removes CAT entirely on an inherited house where the beneficiary meets five specific conditions. For a Dublin family home worth €450,000 inherited by a non-child beneficiary, successful DHE eligibility saves roughly €130,000 in Group C CAT, so the test is worth working through carefully.

Dwelling House Exemption in Irish probate practice

The five conditions under Section 86 are: the beneficiary must have lived in the house as their only or main home for the three years ending on the date of death; the beneficiary must not own or have an interest in any other dwelling at the date of death; the beneficiary must not have acquired an interest in any other house from the same disponer between the date of the inheritance and the valuation date; and the beneficiary must continue to live in the house as their only or main home for six years after the inheritance. All five conditions must be met together. Three waivers exist for the six-year retention rule: age 65 or over at date of inheritance (raised from 55 by Finance Act 2016 for inheritances from 25 December 2016 onwards), medical infirmity certified by a doctor, and a move required by employment. The exemption is claimed on the IT38 and, if successful, reduces the taxable inheritance to zero on the house. Selling within six years without meeting a waiver triggers a clawback of the full CAT that would have been payable without the exemption, plus interest from the original valuation date.

Worked example

Tadhg is 40 and has lived in his mother's Dublin home as his only home for the past 8 years while she was ill. His mother dies and leaves him the house, worth €520,000. Tadhg has no other property. He claims DHE: lived in the house as main home for 3 years before death (actually 8, easily met), owns no other property at date of death, does not acquire another house from her estate, and commits to keep living in the house for 6 years after the inheritance. CAT on the house drops from roughly €40,000 (Group A calculation) to zero. The remaining estate assets follow the normal Group A rules.

The statutory position

Section 86 of the Capital Acquisitions Tax Consolidation Act 2003 sets the five conditions. Finance Act 2016 raised the age waiver from 55 to 65 for inheritances on or after 25 December 2016. Revenue publishes detailed guidance on DHE, including scenarios for mixed-use properties and the treatment of periods away for education or employment.

Related terms in this glossary

• CAT (Capital Acquisitions Tax): The Irish tax on gifts and inheritances, charged at 33% on the value of a beneficiary's inheritance above their applicable group threshold.
• Valuation date: The specific date CAT uses to fix the value of an inherited asset; usually the date of the Grant of Probate, but subject to specific rules for different asset types.
• Aggregation: The rule that every taxable gift or inheritance from the same CAT group since 5 December 1991 is added together before the group threshold is applied.
• Revenue clearance (Section 49 CATCA): A formal Revenue letter confirming that all CAT and income tax obligations of the deceased and the estate have been settled, generally requested by the executor before final distribution.
• Section 72 policy: A life insurance policy taken out specifically to fund the beneficiary's CAT liability, set up so that the payout is exempt from CAT itself under Section 72 of the CATCA 2003.

Related reading

• Dwelling House Exemption: the five conditions
• Family home inheritance use case
• Free DHE eligibility checker