Taxation
• Under the Tax Credit system, Gross Tax minus Tax Credits = Tax Payable.
Amended certificates reflecting the Budget changes will be issued to you during 2009.
• 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 2009
Weekly 12 Month Value
Single/Widowed €700.00 €36,400
One Parent Family €776.92 €40,400
Married (one income) €873.08 €45,400
Married (two incomes) €1,400.00 €72,800
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 €10,000, 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 then €15,000, this income will be exempt from tax and health levy but a minimum €253 Social Insurance is payable. If you exceed these amounts, the exemption is lost and the whole lot is taxed.
• All of your Tax Credits are subtracted from this gross liability to yield the tax payable. The Tax Certificate will show the annual value of all your credits and the equivalent weekly or monthly amount. The main tax credits for 2009 are unchanged:-
Tax Credits 2009
Single Person €1,830 Age (65) Allowance (each) €325
Married Couple €3,660 Incapacitated Child €3,660
Widowed €2,430 Homecaring Spouse €900
One Parent Family €3,600 Dependent Relative €80
PAYE Allowance (each) €1,830
— 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 €5080 income of their own, thereafter the credit is reduced, reaching zero if income exceeds €6,620. 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 €4,000, €3,500, €3,000, €2,500 and €2,000 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.
• From 1st May 2009 Mortgage Interest Relief cannot be claimed for any mortgage over 7 years. Mortgage interest up to €3,000 (single) €6,000 (married/widowed) is now only allowable at 15%. For first time buyers a higher €10,000(s) and €20,000(m) is allowable for the first 7 years: at 25% for year 1 and 2, 22.5% year 3, 4 and 5, and 20% in year 6 and 7. This relief is now granted at source and will no longer appear as relief on your tax allowances.
• Certain expenses carry a 20% Tax Credit:
• From 2009 all unreimbursed Medical Expenses (other than Nursing Home expenses). Maternity care is allowable. A
Psychological Assessment and Speech Therapy for children is allowable. 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.
• Rent to a Private Landlord up to a maximum €2,000 (single), €4,000 (married/widowed), and if you are aged
55 or over up to €4,000 and €8,000 respectively.
• College Fees of up to €5,000 for full or part-time undergraduate courses in Ireland or EU and for postgraduate courses in non-EU countries as well.
• Local Bin Charge up to €400.
• Trade Union Subscription up to €350 (credited at source).
• Redundancy: You do not have to pay tax on Statutory Redundancy, on lump sums from a pension scheme, 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 (if this is the more favourable option, a further €10,000 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. The balance is taxable either as extra income for that year or at the average rate of tax you paid in the previous years.
• Certain items are still allowable at your top rate of tax. These are:
• Nursing Home Expenses (only in 2009). From 2010 they will be restricted to 20% relief.
• An Incapacitated Person or one or more of their family, can claim up to €50,000 to enable employment of a home help.
• Back to Work Tax Allowance if previously unemployed or on disability allowance for 12 months or more – of €3,810 plus €1,270
for each child in year 1, and two-thirds of these allowances in year 2, one-third in year 3.
• Age Income Exemption: If you are 65 or over and your total income does not exceed the following limits no income tax is paid:
Single/Widowed €20,000 Married €40,000 (plus €575 for each of first two children,€830 each thereafter on a full year basis).
If income does not greatly exceed these amounts, you can claim this exemption and pay 40% on the excess.
• Social Levies apply to gross incomes (less pension contributions and permanent health benefit) as follows:
• Health Levy: 4% up to €75,036, 5% on all income above €75,036
• Social Insurance (full rate) 4.0% up to €75,036
• Social Insurance (self-employed) 3% all income
All workers are exempt from Social Insurance if they earn less than €352 per week. Employees on full rate PRSI do not pay Social Insurance on the first €127 of their weekly earnings. Reduced rate contributors do not pay on the first €25 of their weekly earnings. Medical Card Holders and Lone Parents on Social Welfare and persons earning less than €500 per week do not have to pay Health levy. Persons over 66 pay Health levy, but no Social Insurance.
• A New Levy applies at 2% up to €75,036, at 4% to income in excess of €75,036 and 6% to income in excess of €174,980. It applies without deduction of pension contributions or Capital allowances. Social Welfare income is exempt. The exemption threshold will be €15,028.
• Stamp Duty: Exempt from Stamp Duty are:
- All purchases by first-time buyers.
- All new homes under 125m2 bought by owner-occupiers (bigger new homes pay at most a quarter of the full duty).
- certain trade-in agreements will also be exempt
Other property purchased will be liable to Stamp Duty calculated on a progressive scale:
- First €125,000 nil – Next €875,000 7% – Balance 9%
• Pension Contributions
Contributions to pensions are free of Income Tax (and of PRSI and health levy for PAYE workers) up to 15% of gross earnings (under 30) rising in steps to 40% (60 years or over).
• If not in a Pension Scheme you may put the money into a Personal Retirement Savings Account (PRSA) where
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. All other withdrawals are subject to PAYE. If you do not have a
pension (including SW) of at least €12,700, you must use a certain amount of the fund to buy an annuity or put it
in a fund frozen until age 75. The balance can be put into tax-exempt managed funds, (ARF’s). If your annual
withdrawal from your ARF’s is less than 3% of the Fund, you will be required to pay income tax on 3% of it.
The money in the PRSA will pass without income tax being payable if bequeathed to your spouse or children under 21. Tax applies at 20% to children of 21 or over.
• If in a Pension Scheme you can top up contributions in your own Scheme or a linked PRSA by making tax free
Additional Voluntary Contributions (AVCs) up to the income ceiling and maximum benefits permitted by Revenue.
You can spread back AVC’s for up to 10 years to provide for dependant’s benefits.
• A Self Employed person can put contributions into personal pension schemes, in which there is no limit to the
pension or death benefit, but the tax free lump sum at retirement is limited to 25% of the accumulated fund.
On retirement the same rules as for PRSA’s (above) apply.
• DIRT Tax: As of April, retention tax is increased to 25% for ordinary deposit accounts, 28% 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.
