Dwelling House Exemption and Favourite Nephew Relief

Inheritance tax reliefs checker

Budget 2027 thresholds

Answer a few questions to see whether the dwelling house exemption or favourite niece or nephew relief applies, and how much Capital Acquisitions Tax it saves. Uses the thresholds of €420,000, €44,000 and €22,000 from 7 October 2026. See also the gift and inheritance tax calculator.

This is a guide to the main conditions, based on Revenue's published guidance. It does not cover every exception, clawback rule or valuation question, and Revenue decides whether a relief applies. It is not tax or legal advice. Check your position with Revenue, a solicitor or a tax adviser before relying on a relief. Terms of use.

Worked examples

A brother inherits his sister's house worth €350,000 and €40,000 in savings in November 2026. He has lived there as his home for the last 3 years, owns no other house and will keep living there. Without the exemption, €390,000 less the Group B threshold of €44,000 is taxed at 33%: €114,180. With it, only the savings count, and they are under the threshold: tax of €0.

A niece who worked full time in her uncle's shop for 8 years inherits the business, worth €500,000, and €60,000 in cash. Without the relief, everything is in Group B: €170,280. With it, the business uses the Group A threshold of €420,000 (€26,400 tax) and the cash stays in Group B (€5,280): €31,680 in total. If business relief also applies, the business is valued at €50,000, well within Group A, and the tax is €5,280.

Dwelling house exemption: the conditions

For an inheritance taken on or after 25 December 2016, all of these must be true:

The house was the only or main home of the person who died, at the date of death. This does not apply if you are their dependent relative, or they had left because of illness.
You lived in it as your only or main home for the 3 years before the inheritance. A previous home it replaced can count (3 years out of the last 4).
You do not own or have an interest in any other house on the date of the inheritance.
It stays your only or main home for 6 years. This does not apply if you are 65 or over, or must live elsewhere for work or health.

A gift of a house only qualifies if you are a dependent relative of the person giving it.

Favourite niece or nephew relief: the conditions

You are the child of their brother or sister (or of a sibling's civil partner).
You worked for them in the business for the 5 years immediately before the gift or inheritance, more than 24 hours a week at the place of business, or more than 15 hours a week where the business is run only by you and them or their spouse or civil partner.
The relief gives the Group A threshold for business assets only. Other assets use Group B.

How the tax is worked out here

The tax without a relief is the full benefit taxed at 33% above what is left of your group threshold, using the gift and inheritance tax calculator's method. With the dwelling house exemption, the house is left out. With favourite niece or nephew relief, the business assets are taxed against what is left of your Group A threshold and the rest against Group B. The small gift exemption of €3,000 applies to gifts.

Questions

Is there a value limit on the dwelling house exemption?

No. If the conditions are met the whole house is exempt, whatever its value, along with grounds of up to one acre. Budget 2027 did not change the exemption.

Do I have to have lived with the person who died?

No. The test is that you lived in the house as your only or main home for the 3 years before the inheritance. It must also have been their only or main home when they died, unless they had moved out because of illness or into care, or you are their dependent relative.

What counts as owning another house?

Owning, or having any share or interest in, any other residential property on the date of the inheritance. This includes a share in a house you rent out. You also cannot receive an interest in another house from the same person before the valuation date.

What happens if I sell the house within 6 years?

The exemption is clawed back and CAT becomes due, unless you use the sale money to buy a replacement home, or you were 65 or over when you inherited, or you had to move for work or because of illness. Moving out to rent it to someone else also triggers a clawback.

Who counts as a niece or nephew for the relief?

The child of the brother or sister of the person giving the gift or inheritance, or the child of their brother's or sister's civil partner. A niece or nephew by marriage (the child of a spouse's sibling) does not qualify.

Does favourite nephew relief cover everything I inherit?

No. Only business assets (including shares in a private trading company the person controlled and was a director of) use the Group A threshold of €420,000. Other assets such as a house, cash or investments stay under Group B (€44,000). Debts are split between the two.

Can I combine it with business relief?

Yes. Business relief takes 90% off the taxable value of qualifying business assets, and favourite nephew relief then lets the remaining 10% use the Group A threshold. Business relief has its own conditions, including holding periods for the business and keeping it for 6 years.