Why Ireland is not a bad place to get older
With age, they say, comes wisdom and confidence. Growing older in Ireland also comes with some financial benefits, as there are tax savings to be made.
In this blog we will take a look at some examples.
Tax exemption limits
Once you reach the age of 65, you start to pay less tax on your income and you are entitled to more social welfare benefits. Tax exemption limits are income thresholds below which no tax is payable.
The threshold for a single person aged 65 is €18,000 and €36,000 for a married couple. If you earn less than that amount your earnings will not be subject to any income tax.
If your earnings exceed the relevant minimum exemption, you may be entitled to what is called “marginal relief” and you will pay tax at a rate of 40% on the excess amount.
Nowadays, it’s even more common for people to have children at a later age. The tax-free limits increase by €575 if you have children. If you have more than two, the amount goes up to €830 for any subsequent children.
Age Tax Credit
The Age Tax Credit can be claimed if you or your spouse or civil partner are over the age of 65.
The relief can be claimed in addition to the personal tax credit. The Age Tax Credit for single individuals is amounted to €245 and for married people it’s worth €490.
USC & PRSI
When you turn 66, you will no longer be charged PRSI (Pay Related Social Insurance contributions). However, it’s likely that you will still have to pay Universal Social Charge (USC). This is a tax you pay on your gross income.
In some particular cases you may pay reduced USC or not pay at all, depending on your situation. The USC kicks in once you earn €13,000 or more. Standard USC rates are between 0.5% and 8%, but when you turn 70, you will pay USC at 0.5% on the first €12,012 and 2% on the balance.
Relief on health expenses
Every taxpayer in Ireland is entitled to claim relief on the health and non-routine dental expenses.
However, relief can also be claimed if you pay for the cost of employing a carer to look after your spouse, yourself or a family member due to physical infirmity.
Note: You cannot claim a tax relief if the carer is employed as a housekeeper.
Nursing Home Tax Relief
You can claim tax relief if you pay nursing home fees either for yourself or for another individual, whether you are in the nursing home yourself or you are paying for another person.
You can claim this relief at your highest rate of tax (20% or 40%) if the nursing home provides 24-hour on-site nursing care.
A Deed of Covenant is a legal document in which one person agrees to make periodic payments of income to another person.
The person making the payment must deduct tax at 20% from the total payment and at the same time his or her gross income is reduced by the gross amount of the covenant.
The person who receives the payment is taxed on the gross amount of the covenant. However, if the tax withheld is less than the covenantee’s annual tax credits, he or she will be entitled to a refund of the tax withheld.
DIRT tax relief
Relief from Deposit Interest Retention Tax (DIRT) is available for married couples if either spouse is aged 65 or over (or is permanently incapacitated).
Single individuals with income below €18,000 and married couples with a joint income of €36,000 or less won’t be subject to DIRT.
You will need to complete certain forms to claim a DIRT-free account and send it to your financial institution. At the end of the year you can also claim a refund of DIRT.
Avail of every tax relief
Unsure of your tax entitlements? Why not contact Taxback.com! Our friendly tax team will ensure you avail of every relief you are entitled to and transfer your money straight to your bank account.
Our average Irish PAYE tax refund is €1,880 so it’s definitely worth investigating what you’re owed.
The average Irish tax refund is €1,880