Budget 2016 is reducing USC rates for all workers, bringing the marginal tax rate below 50% for anyone earning less than €70,000. These changes are designed to make work pay and keep the recovery going. Our plan is to progressively phase out USC to sustain further jobs growth.
Standard Rate Cut-off Income 2016
|Weekly||12 Month Value|
|Single Person Child Carer||€726.92||€37,800|
|Married (one income)||€823.08||€42,800|
|Married (two incomes)||€1,300||€67,600|
If you rent rooms in your own home for less than €12,000 gross, this will be exempt from income tax and USC, provided the tenant is not your own child, and the rent is not being paid by your employer to facilitate, for example, clients using the room in your home. Short term rentals are also excluded. If you care for up to 3 children in your home and receive less than €15,000, this income will be exempt from tax but a minimum €500 Social Insurance is payable. If you exceed these amounts, the exemption is lost and the whole lot is taxed. You must be registered with the HSE as a child minder.
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 2016
|Single Person – €1,650||Self-Employed – €550|
|Married Couple – €3,300||Age Tax Credit per person – €3,300|
|Widowed – €2,190||Incapacitated Child – €3,300|
|Single Person Child Carer – €1,650||Home Carer’s Tax Credit – €1,000|
|PAYE Credit (per individual) – €1,650||Dependent Relative – €70|
- The Home Carer’s Tax 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 disabled person. You must apply for this allowance. The home carer is allowed to have up to €7,200 income of their own, thereafter the credit is reduced, reaching zero if income exceeds €9,200. Carer’s Allowance is not counted as income in this means test, nor is income from childminding under €15,000.
- Single Person Child Carer Credit applies to a single or widowed person if you are the principal carer of a child aged under 18, over 18 in full-time education, or permanently incapacitated.
- 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 €3,600, €3,150, €2,700, €2,250 and €1,800 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 €18,000 (single), €36,000 (married).
An Incapacitated Person, or one or more of their family, can deduct up to €75,000 from their taxable income to employ a home help.
Certain expenses carry a 20% Tax Credit:
All unreimbursed Medical Expenses (excluding Nursing Home expenses which are allowed at your marginal rate); Maternity care; a Psychological Assessment 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. Relief is confined to the first €1,000 per adult, €500 per child.
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 €7,000 for each student for full or part-time undergraduate or postgraduate courses in accredited courses in Ireland. However, the first €3,000 of each claim is disregarded (i.e. for parents paying only the Student Contribution of €3,000, relief only applies for the second and subsequent child in college).
Course Fees between €315 and €1,270 per course for foreign language or ICT courses (approved by SOLAS).
Rent Payments by tenants to private landlords is being phased out. Only tenants renting before 7 December 2010 still qualify. For them relief in 2016 is up to a maximum e400 (single), e800 (married/widowed), and if you are aged 55 or over up to €800 and €1,600 respectively. The tax credit will cease in 2017.
Employer provided childcare is subject to income tax as Benefit in Kind.
A Universal Social Charge applies to gross income from whatever source (excluding only Social Welfare Payments) and without deduction of pension contributions. USC rates were reduced in Budget 2016:
- 1% up to €12,012
- 3% on the next €6,656
- 5.5% on the next €51,376
- 8% on the remainder
An exemption applies to persons whose total income is under €13,000. The self-employed pay 11% on income over €100,000. Persons aged 70 or over and Medical Card holders whose aggregate income does not exceed €60,000 pay a maximum 3%.
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. All workers are exempt from Social Insurance if they earn less than €352 per week. Between €352 and €424 tapered relief applies starting at €12 and falling by one sixth of your income over €352. The minimum contribution by a self-employed person is €500 per year. From 2014 PRSI applies to unearned income of persons who are required to make a tax return. Insignificant income (e.g. bank interest) of a PAYE payer is not affected.
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. However, a ceiling of €2 million applies to the total value of a person’s pension plan. Any benefit that accrues over that value will have a 40% retention charge, before ordinary tax is applied to the balance. The levy on private pension funds is being eliminated in 2016.
DIRT Tax: A single retention tax of 41% applies to interest earned on ordinary deposit accounts, investment accounts and all Credit Union 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. From 14 Oct 2014 until end 2017, First Time Buyers can get a refund of DIRT on savings to make up a deposit of up to 20% on the purchase of a home.
Local Property Tax is chargeable to the owner of a residential property at a rate of 0.18% of the market value on 1 May 2013 as fairly assessed by that owner (a higher 0.25% applies to the excess over €1 million). This valuation will not change before 1 November 2019. LPT Exemptions include:
- Houses with significant pyrite damage.
- New houses purchased up to October 2016 will be exempt until the end of 2016.
- Houses vacant, where the occupant can no longer live alone due to long-term infirmity.
An owner may defer the entire payment:
- For an indefinite period where gross income does not exceed €15,000 (single) or €25,000 (couple).
- Up to 2017 where gross incomes less 80% mortgage interest falls below €15,000 (single) or €25,000 (couple) and may defer half the payment under these tests up to €25,000 (single), €35,000 (couple). Interest of 4% of the deferred tax will be added each year to be recovered from the sale/transfer of the property.
Home Renovation Incentive: An income tax credit of 13.5% applies to home renovations up to a maximum expenditure of €30,000 undertaken before 31 December 2016 and will be refunded over the two years following the year in which the works are carried out. To qualify at least €5,000 (inclusive of VAT) must be spent. Both homeowners and landlords can avail of this credit. The tax credit is only available where Local Property Tax and Household Charge are up to date.
Capital Acquisitions Tax: Gifts or inheritance bear a 33% tax on the market value of the assets received in excess of certain thresholds, which vary according to your relationship with the giver – €280,000 for a Son/Daughter; €30,150 Grandchild/Brother/Sister/Niece/Nephew/Parent; €15,075 all others.