• Under the Tax Credit system for Income Tax, Gross Tax minus Tax Credits = Tax Payable. Gross tax liability is calculated on your total income (after deduction of superannuation and permanent health benefit) by applying 20% to income up to your standard rate cut-off point and 41% on the remainder. The cut off point will be:
Standard Rate Cut-off Income 2012
Weekly 12 Month Value
Single/Widowed e630.77 e32,800
One Parent Family e707.69 e36,800
Married (one income) e803.85 e41,800
Married (two incomes) e1,261.54 e65,600
Separated spouses may be taxed singly or jointly.
If you rent rooms in your own home to an unconnected person and the annual rent is less than e10,000, the rent will be exempt and subtracted from income before calculating tax, social insurance or health levy. If you care for up to 3 children in your home and receive less than e15,000, this income will be exempt from tax and health levy but a minimum e253 Social Insurance is payable. If you exceed these amounts, the exemption is lost and the whole lot is taxed.
• Your Tax Certificate will show the annual value of all your Tax Credits and the equivalent weekly or monthly amount which are subtracted from this gross liability to yield the tax payable:
Tax Credits 2012
— The Homecaring Spouse Credit is available to a spouse in a one-earner family who is caring in the home for a child who is eligible for Child Benefit or for an aged or handicapped person. You must apply for this allowance. The homecarer is allowed to have up to e5080 income of their own, thereafter the credit is reduced, reaching zero if income exceeds e6,620.
Carer’s Allowance is not counted as income in this means test.
— One Parent Family Credit applies to a single or widowed person if you can show that your child resided with you for at least
part of the year. This relief is not available to an unmarried couple living together
— Dependent Relative Credit is claimable if you support a widowed mother or incapacitated relative whose income does not
exceed the contributory OAP
— A parent with dependent children who is widowed gets an additional tax credit in each of the 5 subsequent tax years of e3,600, e3,150, e2,700, e2,250 and e1,800 respectively.
• Tax credits which are unused are not refundable. They will be carried forward from week to week during a tax year, but if unused after the end of the tax year, they are lost.
• Age Exemption: Persons aged 65 or over are exempt from income tax if their gross incomes from all sources is under e18,000 (single), e36,000 (married), no income tax will apply.
• An Incapacitated Person or one or more of their family, can deduct up to e50,000 from their taxable income to employ a home help.
• Mortgage interest: Mortgage relief is being phased out. It will not apply to new loans from 2013. New loans taken out before 31 Dec 2012 will qualify for relief:
- A new loan for a first-time buyer qualifies for seven years of relief on interest up to e10,000 (single), e20,000 (married) and is allowable at 25%.
— A new loan to trade up will get 7 fresh years of relief on the entire loan, but a loan to extend will only get 7 years relief on the “top-up” element of the loan. In both cases relief is on a maximum interest of Ä3,000 (S) and
e6,000 (M) and is capped at 15%.
Mortgages taken out since 1st Jan 2004 hold relief at 20% until 2017. As promised, relief has been increased to 30% for First Time Buyers between 2004 and 2008.
• Certain expenses carry a 20% Tax Credit:
• Rent Payments by tenants to private landlords is being phased out. Only tenants renting before 7th Dec 2010 still qualify.
For them relief in 2012 is up to a maximum e1,200 (single), e2,400 (married/widowed), and if you are aged 55 or over up to e2,400
and e4,800 respectively. This is to be phased out by 2017.
• All unreimbursed Medical Expenses (including Nursing Home expenses); Maternity care; A PsychologicalAssessment and Speech Therapy for children. You can also claim for the medical expenses of a close relative or any incapacitated or elderly person regardless of their means. Routine Dental or Optical Care don’t qualify.
• Health Insurance This relief is now granted at source and deducted from your premium by the insurer.
• Insurance to cover long-term care costs in the event of serious disability, and to cover non-routine dental costs.
• College Fees (including Tuition Fee and Student Contribution) of up to e7,250 in 2012/13 for full or part-time undergraduate courses in Ireland or EU and for postgraduate courses in non-EU countries as well. However, the first €2,250 of each claim is disregarded i.e. for parents paying only the Registration Fee, relief applies where a second child is in college at the same time.
Employer provided childcare is subject to income tax as Benefit in Kind.
• A Universal Social Charge will replace the Health and income levies. It will apply to gross income, from whatever source (excluding
only Social Welfare Payments) and without deduction of pension contributions
— 2% up to €10,036 (€193 per week)
— 4% on the next €5,979 (next €115 per week)
— 7% on the remainder
An exemption applies to persons whose total income is under €10,036 (€193 per week). The self-employed pay 10% on income over 100,000.
• Pay Related Social Insurance (PRSI) applies to gross income (with no deduction for pension contributions) of workers and the self-employed aged 16-66. A single rate of 4% now applies to both categories with no ceiling. Public servants on modified rate will now pay 4% on their income in excess of €75,036.
• Redundancy: You do not have to pay tax on Statutory Redundancy, nor on termination payments due to injury or disability. Tax is payable on any other lump sums but after the deduction of the more favourable of:
• €765 for each complete year in the job, plus €10,160 and a further e10,000 is allowable if you are not a member of an Occupational
Pension Scheme, or
• 1/15th of your annual income (average of the last 3 years) for each year less any tax-free lump sum from the pension scheme.
This deduction cannot exceed €200,000. The balance is taxable either as extra income for that year or at the average rate of tax you paid in the previous years.
• Pensions: A certain portion of gross earnings under €115,000 can be put into a pension tax free. It is up to 15% (under 30 years) rising in steps to 40% (60 years or over), allowable at your top rate of tax.
If you are not in a Pension Scheme you may put the money into a Personal Retirement Savings Account (PRSA) organised by your employer. A self-employed person can put money into a Personal Retirement Fund. The fund will accumulate free of tax on income or on gains. You cannot withdraw money before age 60. On retirement you may take out 25% tax-free.
Retirement lump sum payments in excess of e200,000 are taxable, at the standard 20% rate.
• DIRT Tax: Retention tax is increased to 30% for ordinary deposit accounts, 33% on life assurance or investment accounts.
Persons who are 65 and over, or permanently incapacitated, can, if your total income is not sufficient to make you taxable, notify
your bank and receive the interest without deduction of DIRT.
• Capital Acquisitions Tax: Gifts or inheritance bear a 30% tax on the market value of the assets received in excess of
certain thresholds, which vary according to your relationship with the giver. Lower thresholds and a progressive rate structure
are to come in for 2012.
A:Son / Daughter: 250,000
B: Grandchild / brother / sister / niece / nephew / parent: 33,208
Relationship other than Group A or B: 16,604
• Stamp Duty: Transfers of residential property will pay 1% up to €1 million, and to 2% on any excess over that.
• Household Charge: a uniform charge of €100 will be paid by houseowners in 2012, unless you are on Mortgage Interest Supplement. For second homes and landlord properties a combined charge of €300 applies in 2012. In the future it will become related to the value of the property or the site. Water charges based on metering but with a basic free allowance are to be introduced by 2014.